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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So it bombed but will it leave some technical innovation behind it? Will it have catalyzed the takeoff of EV? Or is EV financially ahead of its time?
Tesla put EVs on the map and made them cool. This is a big accomplishment. EVs are here to stay. But Tesla burned many billions of investor dollars to do it.
The Nissan Leaf is pretty cool…
And actually make a profit.
Uses the same AC motors too. Tesla brought the price down enough for second movers to gain advantage.
Do you have any reliable source confirming that the Nissan Leaf is indeed profitable? From what I know, electric cars are on the whole loss-making, despite the massive amounts of subsidies thrown at them across the globe.
Innovators that educate/create a new market rarely do well as others quickly rush in and opportunistically take advantage of the newly educated market. This is capitalism. It is more profitable to refine an existing product and enter a newly created market than to do the spend to actually create that market in the first place. Asia does this VERY well. The big incumbents have now been handed a market where their real economies of scale and corporate experience can be exploited. They should thank the great marketer Musk (who sails off into the sunset with inept investor’s funds), and the “investors” get a much needed lesson and haircut. Everyone wins!
Fast followers win=second mouse gets the cheese.
Sony walkman, Atari, McDonalds, Blackberry, Nokia, Yahoo, etc. They all made tons of money.
Educate and created a market without making money in the process is actually an oddity, than the rule.
This is right in line with the history of cars in general. They started out as playthings of the rich.
Henry Ford’s “My Life And Work” is free online and even though he’s not a great writer it’s a very interesting read. He recounts his first encounter with a “field engine” – these were engines used to power farm stuff, often pulled by horses, but a few people were experimenting with having the engine power itself. The great-ancestor of a modern day tractor with a PTO (power take-off).
Ford loved all things mechanical and taught himself watchmaking when he was still a teen. He went on to build about one car a year, and was a racing driver, racing his own creations, for a while. He sensibly got out of that game as soon as he could, and he actually went around and bought each one of his early cars, which he’d sold around town to finance the building of the next one.
Electric cars were on the scene early on, also. They were favored by people who couldn’t work a crank starter – there was a stereotype of little old ladies in their electric cars toodling around town.
So for decades upon decades, “electric” meant things like “weak”, “nerdy”, etc.
Tesla made electric cars sexy and cool. The Prius is never going to be sexy and cool. Reliable, with body panels that line up correctly, perhaps. But not sexy and cool.
Ford’s first two companies went bust. Ford Motor Company was his third.
The big factor was his getting a hard- nosed manager. This guy once nailed shut the door of a rail car with a load of early Fords to stop Ford doing last minute tinkering.
One story re: Ford. I think from after Edsel died but not sure.
Ford was having engines supplied by a contractor.
Mr Ford was strangely very picky about the crate: type of wood, screwed not nailed etc.
The supplier just said ‘he’s nuts’ but humored him.
Then one day they go to the assembly line and see their nice crate being taken apart for floor boards.
Ppl that need a sexy and cool car lack inner sexy and cool.
Those that are sexy and cool don’t need a car to be since they have enough already.
I visited the Henry Ford Museum, twice. Located in Michigan. Went to his private residence and took a tour. His wife drove an electric car! It was there at the “Museum” (his private home).
David Halberstam (killed by a distracted driver,….his own driver!) wrote a great book with many anecdotes about Ford : “The Reckoning”.
Ev’s are a fraud, and for that matter so are solar panels, we all want to believe that economics can overcome the laws of physics. Tesla has political headwinds, being a favorite of P44, who P45 despises. The US used low interest rates to build up excess NG supplies, now they can use that NG to make electricity to supply the grid that goes to my house, where I could plug in my EV, or I can just convert my old car to NG for a few hundred bucks. Tesla has many options (moving to China), or broadening their role to transportation in toto. NG is all over the place, just not in the family car. But bad Tesla (the car) is not going anywhere while good Tesla (the rocketship) is still providing lift.
Battelle hates dinosaurs as fuel?
Ivar krueger! Diamond match company.
The Wikipedia on Ivar Krueger is quite interesting!
However he was not involved with the Diamond match company, it was “Swedish Match” and others. As for Diamond,
“The Diamond Match Company was formed in 1881 through a partnership between the Swift, Courtney & Beecher Match Company of Wilmington (Delaware) and the Barber Match Company of Akron (Ohio). By 1889 the company had expanded, incorporating locations in Connecticut and Illinois. In the following years the company introduced various types of matches, and in 1911-1912 a safety, strike-anywhere, match was developed. During World War I there was a shortage of several ingredients used to make matches, including muriate and potash. In response, the company expanded westwards, developing methods to extract these materials from kelp and salt deposits. The company re-incorporated in 1931 in the state of Maryland. In 1986 the Diamond Match Company was acquired by Diamond Brands.”
Oh, he bought about half of Diamond Match though…
EVs are here to stay until the L-ION battery becomes obsolete due to the depletion of rare earth metals or until the mining of these metals becomes too expensive as the return on this investment diminishes.
Unfortunately for EVs manufacturers, their target demographic can’t afford them. That is especially the case of Tesla Motors’s target demographic. TM may well be “bankwupt” in the span of a year.
Musk’s conference call last night was an utter disaster. He’s telling analysts in response to legitimate questions to sell stock? These questions were not dry nor were they boneheaded in any way.
I’ve asked this before, so I’ll ask it again: where on earth is the money going?
Electric vehicles are a buncha crap! Only stupid liberals buy them.
Electricity doesn’t come from the moon, windmills, sunshine, or corn. 90% of American electricity comes from coal, natural gas, and
uranium. People who drive EVs are really driving COAL CARS and hydrocarbon cars. There are no “fossil fuels” by the way. Oil and coal did not come from rotting plants for God’s sake!!!
People buy EVs because they’re tired of paying $50 or $100 a month for gas, and because electric drive trains are very simple and reliable and super-low on maintenance, and because electric motors have a nearly flat torque curve, which is ideal for performance driving as well as city driving or hauling, and because electric motors don’t idle and waste fuel when you’re waiting at a stop light….
The savings in operating costs of an EV over the years can be fairly big, depending on how expensive your electricity is at home. Also, in a cold climate, EVs are not as efficient as in warm climates since they have to use battery power to heat the car, while ICEs use waste heat to heat the car. Purchasing costs tend to be a little higher, though they’re getting closer every year….
So it’s a matter of math whether or not to buy an EV, not being liberal or conservative.
You don’t have to buy an EV. No one forces you to. Keep driving and paying for whatever you have, no problem. It’s your money. Other people make other decisions on how they look at their dollars and cents.
Automated production nope. Batteries – nope (Panasonic).
Cool advertising and hype to build a cadre of Koolaid drinking true believers – now thats innovation. Although even that is out of an old playbook.
It’s the beginning of the end.
You must listen to the conference call. The stock price was stable after hours until Musk lost it during the call. I didn’t think this quarter’s call could beat last’s but it did.
I listened to the download of the CC. I honestly couldn’t believe the first 15 minutes; Elon sounded completely out of it and almost apathetic. He picked up a bit near the end (before losing it entirely with the analyst’s questions).
In any case, Wolf’s analysis is of course spot on: it is an entirely unsustainable enterprise given its debts and burn rate. There may be 400K or more people who put down $1000 deposits on the M3 but they were expecting a $35K car [which doesn’t exist and can’t be produced profitably] not a $50K+ one.
For those interested check out @TeslaCharts on twitter for further analysis.
Also many of the pre-orders were in California. I’d guess that many of those were driven by the ability to use the HOV lane. However, with each year the HOV lanes get slower and more congested to the point where changes really need to be made to keep compliance with federal law for the minimum avg speed required in these lanes.
As more EVs get sold, the louder the whining gets about carpool cheaters gets mainly from people in EVs who view that lane as the chief benefit.
HOV is like handicapped parking, one day you wake up and realize you are the only one who doesn’t have it
I never understood how High Occupancy Vehicle meant one or more passengers. Two is not high occupancy.
Why are we so quick to assign Tesla to the dead-pool, but not Uber (or Netflix)?
PS: Has there ever been a dot.com/unicorn that burned multiple billions over a period of years that became profitable?
Amazon? I think it was fifteen or more years of losing money..???
Amazon created AWS as their cash cow. None of those others have an insanely profitable side business.
And when was AWS created? After a decade of losses?
Telsa, Uber and Netflix all are burning cash at a frightful rate and will all be bankrupt in the near future if their trends continue…
Even quicker if interest rates keep rising.
Netflix is cashflow negative, but they are earnings positive. The question is, how many subscribers would they lose, if they stopped to make ever more expensive content. Uber on the other hand will go bankrupt at some point, but they are not a publicly traded company, so at least no dumb retail investors will get burnded.
EBay? Only time I didn’t lose money shorting Ebay was on 9/11!
I think I saw an example of this back in the 80’s.
A local dairy had installed a bunch of automated equipment for manufacturing its ice cream bars. The whole thing was supposed to run with 3 employees and a foreman. They hired me on a few months later when they suddenly had to add a bunch of employees. The automated equipment malfunctioned so much that they had to add people to stand at places all along the line and correct the automated equipment when it messed up and before the whole line became a complete mess. The good news was that they did start to hit their production quotas with all of us extra people on the line, once everyone figured out what had to be done.
Sounds exactly like what Tesla is saying in their report-eese when they say “due to higher labor content in certain areas of manufacturing where we have temporarily dialed back automation.”
Why automate when the global surplus population will work for pennies per hour and the pool of migrant labor in the US is boundless?
To me, this is just another example of Capitalism at Global Size is not really capitalism at all but some Enterprise by Rulebook. All the player companies, with vast sums of money, are steered by government boundaries of taxes and laws. Why would companies expend free cash to buy back shares, instead of investing in production? Rules. Why would stock share prices go higher, as companies lose more money? Rules about bankruptcy, taxes, and accounting. When mere mention of “tariffs!” without executing any substance, causes firms far and wide to lose value… Enterprise By Rulebook has to be replace.
About as far away from capitalism as you can get…
Elon Musk’s growing empire is fueled by $4.9 billion in government subsidies
Capitalism is as capitalism does.
It’s more than ironic that hearing people whining that “This isn’t real Capitalism” sound exactly like die-hard Communists in the late 80’s saying, “But this isn’t real Socialism” when talking about the Soviet Union.
“Capitalism with a human face” is as much a delusion as it’s Socialist counterpart.
Read what I wrote. It’s NOT Capitalism.
100% agree! You nailed it!!
Hillarious. So, at one point he says his $50 billion company is in trouble because he didn’t anticipate that the press would sensationalize problems with new autopilot vehicles. Oops.
Didn’t Robert Heinlein write story after story about that 50 years ago?
+1 for Heinlein. And Pohl. And all the others that explored all the important issues freaking everyone out 50-70 years ago.
=Maybe investors and perhaps even the true believers and Wall Street hype promoters are getting tired of the hype=
No,Mr Richter,we are not getting tired !!!
There is just one Doubting Dorothy in the White House-
” Herbert Hoover does not share the widespread belief that the speculative debauch in the stock market is a happy and healthy phenomenon.
On the contrary, he has been supporting the Federal Reserve Board in its unavailing efforts to check the flow of credit into speculation, and he has done his share of worrying over the possible consequences of a collapse of prices.”
Don’t listen to Mr.Hoover, he is such a perma-bearish sourpuss.
We believe that by this time the boom is well beyond control, except by some drastic measure which might bring on the very crash it was intended to avert.
Otherwise the economic skies seem clear. Business is undeniably booming.
Perhaps the speculative storm will manage to blow itself out and all will be well. Prosperity, these days, has come to be taken for granted.
Busy men whose desks are piled with problems pressing for solution do not borrow trouble by debating just when and how it might come to an unimaginable end.
There may be a recession in stock prices, but not anything in the nature of a crash.
We expect to see the stock market a good deal higher than it is today within a few months.The economy is fundamentally sound.
I could only listen to 16 minutes worth of that drivel, When Enron said “moats are lame” i nearly barfed and had to turn off……….and i turned off Stoneflower by Jobim to listen that crap…..sheesh!
So, this amateur car company is trying to build sedans, and in ‘manufacturing hell’ trying to work out how to do this, while Ford, which seems to know how to build cars but decides that the margins are too slim in cars and is abandoning the market almost completely.
Comparing Apples to Oranges. Ford is still persuing EV and hybrid tech in cars, they are just pulling car manufacturing out of USA. They are cutting costs and increasing profits, America is a dead horse for the auto industry. Ford just decided to stop kicking it.
Whats with the tiny gain?
Some kind of tax adjustment or credit, if I remember correctly.
I believe they hoarded and then sold all of their energy credits.
Thanks. That rings a bell.
“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.”
Why can’t Tesla outsource the manufacture of these cars to another company? And with all its billions why not hire managers who know how to build cars?
Or am I over-simplifying the problems?
Not a bad idea, but…
It’s already outsourcing a big part of the manufacturing to component makers that make entire assemblies and ship them to the Tesla factory to be assembled (which is normal in the auto industry). But Tesla could become the first “fabless” automaker, where all manufacturing is done by a Chinese company. Then Tesla would no longer be an automaker but a design house, and the Chinese company would have everything. But the Chinese company would have to make a profit. Which is precisely what Tesla can’t figure out how to do.
This might be a valid scenario after Tesla files for bankruptcy and is seeking a way to emerge from bankruptcy.
South sea bubble (1720) derivatives were written OTC when short rates would never go north and business synergies never south?
To remain in a company closer in size to Tesla, Porsche AG tried to outsource part of the Boxster convertible production to Valmet of Finland and things didn’t turn out too well. Uneven quality control and big headaches with the supply chain were just two of the issues the people at Stuttgart faced.
In the end when Porsche became merely a division of VAG they did the math and simply bought Karmann’s factory in Niedersachsen when the latter went bankrupt in 2009. This factory has been dedicated to Porsche “lower tier” models such as the Boxster and to provide extra capacity for other high end models from the VAG group.
In a bizarre twist of fate, while Karmann had been in decline for years what contributed to its final demise was the Chrysler Crossfire. Chrysler outsourced to Karmann not merely final assembly of the Crossfire but a good chunk of design and engineering. It was a disaster, but again the managers at Chrysler at the time were very “hot” on outsourcing because they thought they could beat Honda and Toyota at their own game, blissfully ignoring those companies may outsource component engineering to other companies, but these are companies they own or directly control (such as Denso and Nissin) and the whole project is always overseen by managers from the parent company who have pretty much full powers.
And one final note. “Why not hire managers who know how to build cars?”. Just ask French automakers.
Their products are if possible somehow worse than they were twenty years ago because they still have the same old issues but have become harder to work on and more expensive to fix.
Since these problems were solved by their competitors long ago why not simply hire somebody to fix them? Because management doesn’t care: building reliable cars that will last more than three years is not their business model.
Tesla is the same thing: their management doesn’t care about profits because that’s not their business model. Leave that model to Toyota and VAG.
What Tesla business model is, besides selling junk bonds and hyping share price, we are not told.
The managers probably do know how to build cars, but a CEO sleeping on the production floor, micromanaging, is not the formula for manufacturing success in any enterprise.
I predict Musk is going to take Tesla private.
Then instead of bitchy grasping shareholders he can sit down with those angels from Goldie or private equity.
Maybe Musk can one day go on Shark Tank and see if Mark Cuban will give him an offer for a skin-in-the-game percentage of the company.
Or Kevin O’Leary can offer a line of credit and demand a royalty for every car sold, in perpetuity of course.
Musk will give his typical ambien + red wine counter offer.
Wolf, that Tesla chart looks like the rising interest rate chart you posted today turned upside down!
Rising rates look like they are about to burn a lot of zombie corporations out there. As it should.
Too many are copying short seller Chano,s but have they looked at his record lately he is not even winning.
More to the game the profits, and revenues, and Musk is a great.
It is simple. The snake oil story. Often been told.
Key interest holders have great plans to make it big. The bigger the better. It means their rewards could be massive over time. Thing of something. Something catchy. Something sexy sounding. Look for people with big bugs. Start when you log in a few names who are “prepared to invest”. Use them to sell your venture. They will agree. By putting money in you they want back if possible many times. They are willing to appear in CNBC, Bloomberg etc to help sing the snake oil song. Try not to return their money. Otherwise you have nobody to sing snake oil song for free on your behalf. Overtime continue to sing and refine the snake oil tune. Behind plan and manipulate.
Engage big mouth piece always. Prepare your tune each time. Like we have many orders but we can’t fulfill because of……Like my smartphone phoenix A, is state of the art.
So sexy we have 10,000 retailers lining up to resell…..Like
one claiming to have 100 and 1 million regular customers
who buys thousands each month…Like a company call aOldfool who boast of millions of names in their databases that rents their bicycles.
Like the recent phenomenon on cryto currency. Big fanciful,
technological terms, coin exchange, digital currency, blockchain…
Each time plan to give statistics that others cannot verify.
Employ digital bits and bytes systems. This apart from making your entity sexy, importantly it is hard for others to verify your figures. Example “We have millions of abalone in several fish farms all over China….. or we have billions of trees in Mongolia.
Could make you massively rich. Also along the way others will pitch in to sell your snake oil because they will become committed to you.
A niche , cool, trendy, hand built electric vehicle. Kinda sounds like the rolls royce of ev’s. Mr musk may have pulled it off it it raised prices accordingly.
Everybody is reading 1980’s textbooks. Somebody who buys Tesla is a well to do family. They spend a lot of money eating out in fancy places, buying fancy things, and going to artsy-fartsy get togethers that have high entry price.
All Musk has to do to become profitable is to simply borrow a leaf from Zuck’s book. Spy on his users and show them ads. Since his user base is not flaky like Zuck’s is, he can charge a pretty penny. Musk is sitting on top of a platform that he can start monetizing any time he wants. Want to eat some exotic food not found on yelp? He’s got it. Want some ‘entertainment’ of the kind Tom cruise found himself in the last Stanley Kubrick movie? Done. Finally, if the driver is, hmmm…,let’s just say distracted, he can even find the nearest mortician. As the analysts like to say, the user can get end-to-end (pardon the pun) service without leaving their Tesla.
Gotta say it. I’ve been saying for two years here and on other sites that the whole AI (a forty year- old term) automation, robotics etc. topic is over-hyped and over promised.
The newspapers, blogs etc. are full of think- tank gurus, most of whom have never turned a wrench OR written a line of code, proclaiming
the imminent replacement of most jobs by robots.
Now Musk has just said: ‘I made a mistake trying to over- automate the Model 3 factory’ and he adds. ‘Humans are underestimated’
Yes, yes, yes, Elon, they are. As GM found out in the 80’s when it tried to automate a factory.
Somewhere in Web World, a real manufacturer has explained why: the robot can apply a uniform torque to a bolt, but for example, can’t deal with one that is cross threaded. Etc. etc. etc.
These little screw ups happen all the time on an assembly line.
And Tesla has also conceded that the the witches’ brew of AI, receptors and effectors known as self- driving has been over- hyped and over sold. It has settled a class action suit agreeing, roughly, that you won’t be able to down- load a true self- driving app when Tesla perfects it, because it doesn’t know when that will be.
“…The newspapers, blogs etc. are full of think- tank gurus, most of whom have never turned a wrench OR written a line of code…”
Very well put, I could not have said it any better. I feel that we are slowly reaching the point where all over society some harsh reality checks are going to refute these wonderful theories.
Mounting debt, stalling growth and rising interest rates combine into a very combustible mix that might be ignited by something like the spectacular failure of Tesla. With some “Lehman-moment-like” event that takes down any number of high-priced unprofitable “promising” companies as a result.
I see some handwriting on the wall, I just can’t quite decypher it yet.
Nick and Jos….Excelent Comments!
I wonder why so many are jumping on the next best thing to people? tech is better. They must have been bottle-fed babies. :-)
What is Musk’s goal here? Is it to have Tesla acquired? Seems unlikely given their inability to make a profit and massive debt load. Maybe some automaker will scoop up the Tesla name and other intangibles at a fire sale price later on.
Tesla = DMC of our times ?
Off Topic: I work for a Construction Equipment Giant in Europe and we are seeing results like the company has never seen before. YOY the sales are up 30% and it is continuing this way. When this started happening last year the management was also struggling to tell the reason why! Is it a sign that all those money printing is actually working? Has the huge amount of money printed started to appear in real industry. And China is also flying!
Why is it that there is enough information to indicate that a Tesla short would be a good bet, yet experience indicates you could still lose your shirt on such a wager. Only in the investing world can gravity be defied, but when it finally applies, there are many people that predicted the ourcome, but didn’t make any money on the trade.
It’s a Rules-Based Game. Losses are OK, because the rules say, “Price is a matter of beauty, not food on the table.”
The Rules say banks can “write off” bad debt, Trump goes bankrupt multiple times, now has negative net worth, but banks stop asking for payments, if it serves a purpose elsewhere. ….or, until caught and fined.
“Why is it that there is enough information to indicate that a Tesla short would be a good bet, yet experience indicates you could still lose your shirt on such a wager.”
Couldn’t be the FED counterfeiting the currency beyond belief, now,
could it ?? And giving it to their rich friends ??
It also doesn’t help that Elon Musk has trash-talked Tesla’s stock price as overvalued for so long (six years) people are starting to listen.
Anyway Tesla finally started to face reality means this will be “FUN” year.
Sure, Tesla loses money on every car it sells, but it makes it up on volume!
OK, seriously now, which quarterly loss report will be the straw that finally breaks the Unicorns’ backs?
Would this article be published if TSLAs market cap was 1billion instead of ~50 billion.Of course not.TSLA is much less a story of innovation and technology and much more one of a stock where rampant speculation resulting from Central bank liquidity has pushed its stock to levels completely unrelated to its prospects as a company.Its silly stock market valuation allows it raise cash to keep the charade going much longer than the economics of its business would ever suggest.
Agree. A market cap of $1 billion would force real discipline on Tesla. It would not be able to lose money like this, and it would not be able to raise funds to subsequently burn this fast. Tesla’s number one priority would be to stay alive by figuring out how to profitably manufacture cars. But that’s a hard thing to do.
Auto club will buy it as a consortium to save the last American dream, and battelle wins by losing!
I wonder if also the share price gets pushed up by funds and institutions wanting to virtue-signal how “environmental” and “sustainable” they are. Look all you numpties who conflate ownership of a security with “what your twitter followers find socially acceptable:” We have TSLA in our holdings!
There was a good chance of Tesla doing well with the niche production of high- end expensive sports cars. (Porsche is the worlds most profitable car co)
It was the move into the Model 3 that has endangered the whole operation AND damaged the cache of the niche. There is no way Porsche is going to offer a 35 K car, electric or other.
Let Hyundai or someone take over the build and Tesla can supply power train.
I agree. Tesla should have stuck to making a few thousand innovative electric luxury sports sedans and SUVs a month, charge upward of $120K for them, and perfect them and fine-tune its manufacturing processes along the way.
However, with this strategy, it could have never raised the many billions of dollars that it raised and subsequently burned, and it could have never driven its market cap to nearly $60 billion at one point.
For Tesla to fly like it did, it had to be a religion, not a niche automaker.
In that case, TSLA is in deep doo-doo. Maybe Tesla Motors will rise from the ashes and begin again, but TSLA is toast.
Someone’s in need of another snort of fairy dust!
Remember when Apple was on the cusp of bankruptcy and down to $10 a share? Pepperidge Farm Remembers…..
The Tesla revolution continues, and Musk will laugh all the way to Mars.
I agree the big plans of today are over-hyped. The technology may be realistic, but it far exceeds society’s needs and ability to pay for it. You can only squeeze so much juice out of a turnip. With today’s high debt loads, there is little budget to spare for far fetched technology, whether people realize it or not. The major focus right now should be repayment of debts, if the economy is to avoid a severe crash.
If a technological advance eliminates jobs, there has to be other jobs that those people can take at equal pay, otherwise all you have done is concentrate income and wealth. In other words, you may have made one task more productive with the technological advance, but you have also idled people, concentrated income, and reduced overall demand and spending.
On the contrary, the EV revolution is happening…..in China. China produces over half of global batteries, and controls over 70% of global production.
….and Tesla is building a new gigafactory there.
The US will fall behind as new powers rise. In the post-global/post-national era, borders mean nothing.
EV technology is an example of a technology that makes sense and builds sustainability. It creates jobs. However, when you try to mechanize the entire plant with robots, that destroys jobs and makes no sense long term. Sure, it frees people up to do other things, but when there are no opportunities for people to do other things to make a decent living, the innovation makes no sense at that point in time. EV is great, but the robotic technology is bad.
Roads. Roadbuilding and maintenance will doom the automobile. The world increased in population by 330 million ( equal to the USA total population) since 2011. Was a complete Interstate system, freeways, etc. built since 2011, considering all areas of the planet? Doubt it.
Over a billion cars worldwide, and the total miles of roads cannot be maintained.
Once the yield curve inverts the Federal Reserve will dump long paper to defend the need to buy depressed assets which get depressed by dumping long paper? The Fed wants the mortgages !!!! The fed would face revolt from its membership doing another Qe anything! Shadow banking gets crushed and will need some assistance continuing in its present business model?
Question: Does tesla include depreciation and amortization of their factory capital investments in their gross margin figures?
If so, Musk’s story might make sense, if not, no.
(i.e., they are *expecting* an extra 20000 cars per quarter in half a year (from 800/wk to 2500/wk), so that’s an extra $???? to the top line?
Another interesting bit from the call was that they’re cutting capex ~10% this year. Sounds like that contradicts the “get there faster” plan.
I don’t think so, gross margin should not include depreciation. I think it was a subtle way of saying ” we threw immense amounts of labor to eek out as many cars as we could”, which was twisted into “temporary underutilization of our manufacturing capacity”
Elon is the 21st century PT Barnum.
Manufacturing overhead costs would be part of cost of goods sold (COGS), which is deducted from sales to arrive at gross margin/gross profit. Manufacturing overhead costs would include some allocation of the depreciation of the facilities. (This is an area of the income statement that can be easily manipulated.)
A different perspective (more useful, IMO), addressed in managerial cost accounting and microeconomics, is contribution margin. As long as the last unit sold is making some contribution to fixed costs (including depreciation), then it makes sense to produce and sell that unit. I gather Tesla is not anywhere near that point. The sales price of the vehicles is too low.
I am a former financial analyst who looked at their numbers. On the luxury car models, they had 20% which is on target for luxury cars. It was SG and A expenses driving the loss. Teslas operating margin was 2% versus GM which was 6% for all product lines. It was interesting to read how Henry Ford got a manager in there to counter his own shortcomings to get the production line consistently profitable. Elon Musk is far too much of an egotist to see how his tendency to over promise and underdeliver is going to kill the company in the long term. What he should have said about the projected 25% gross margin for the economy car is that they are working on technology which they believe can produce that in the long term. It isn’t just about managing expectations, it is understanding what is takes to make technology a reality as well as getting the right people in place to do so.
One more thing. I have always wondered by Toyota left, especially if GM on luxury was on target. They could just buy the company and take over operations. I think Toyota thought they would be paying far too much. Also, Musk does not seem interested in getting people in there to fix problems they see in the entire operation. You can tell by these calls he doesn’t listen to anyone
I read some of the questions and answers from his latest interview. He sounded a lot like the Donald when he didn’t like a simple question that wouldn’t have a positive answer. “Boring question, NEXT!”
Next time someone points out he is losing money he will start declaring Fake News.
Also, didn’t Musk refuse to patent any of Tesla’s EV technology ? Or, maybe they didn’t have any technology that it could patent. As for popularizing a new technology, Tesla will become the CP/M of its time. Only geek historians will remember it.
Maybe more like Commodore Business Machines. They had a computer, the Amiga, with a graphical user interface with a mouse, in the mid-1980s. And it was affordable. Millions had gotten into computers with Commodore64’s and Commodore Vic-20’s. Souped up Amigas using software called “Video Toaster” were highly desired machines for doing actual work, for years after Commodore stopped making them. All this and then Commodore just kind of … went away.
Personally, I’m still baffled that Casio didn’t essentially become the entire personal computer industry. They had the skills with designs, with plastics and buttons and circuit boards, the whole thing, producing millions of watches and (musical) keyboards and radio-clock things with tons of functions, but somehow they never went into micro computers or POS terminals, another field I think they could have eaten up.
Truly staggering how TSLA is not a penny stock. These days, I’ve been looking at this share price as an indicator of market frothiness
Tesla is just another CIA-backed weimar-style cash machine used to fund black ops and fronted by tribe members, along the lines of twitter, farcebook, scamazon and the rest. All these clowns are mere actors playing a part in the great fraud that the stock and bond (and RE) markets have become today.
I have tried to explain all this to a friend of mine who has a lot of his money in Tesla stock, but he says that the real future value of Tesla is going to come from their innovations in battery technology.
He sounds pretty angry when he gets to that point.
The problem many overlook is not in the manufacturing, but in the servicing. And also in safety and durability.
Tesla has not even got to the task of rolling out a proper servicing network – something that the established car manufacturers already have. That will cost billions and billions more. I wonder what is the loss rate for Tesla, but I hear that as far as they concern, any safety belt activation is a total loss. That would also drive the cost of insuring Teslas to the sky.
We were told that EVs would run for so long (because there are much fewer moving parts in them) that batteries would need to be replaced, but now we are told that batteries will outlive cars. Why? Obviously the reason is that cars will have a very short life because of the complex control electronics and probably some other things.
There are many other reasons why EVs are not going to take off and probably will stay within 10% market share or even less. Such Teslas exploding in a minor car accident.
The further it goes, the more obvious this will become.
Did you see Tesla’s analyst call?
Justifying the cash burn is “dry.” Don’t be a bonehead. We are blind and Elon will give us sight.
Musk went totally off the rail. It was so painful I couldn’t listen to it for more than a few minutes. I think he’s losing it. He is a visionary that is sinking ever deeper into his visions.
I hope he can survive this. I’m a hybrid, a Musk fan but an extreme skeptic of this auto- factory and the Model 3.
I don’t think he has been a con man, I think he actually believed he could do this robot factory thing. The question is whether the struggling business man starts to run a con when reality sets in.
The Space- X vertical landing was so cool. ( I told ya I’ve been sort of sucked in) And it looks like Space- X would be a serious competitor in the ongoing satellite biz.
And yes a dozen car cos are bringing out maybe a hundred models of E- cars but Musk started it.
Space X. the Boring Machine, even the Hyper Loop. (Ok please not Mars just now) all have promise or are at least exciting, but this damn Model 3 is just not that exciting to me and I see it as an example of an innovator who should be inventing getting bogged down in things like door latches, glove compartments, etc.
He can still call the 3 a Tesla if South Korea builds it.
GM calls cars built there Chevrolet.
PS: Let’s hope Tesla and Musk can avoid the fate of Nikola Tesla, who laid the foundations of our tech based civilization with his invention of AC power but died broke and arguably insane.
Looks like their relationship with Panasonic is showing signs of strain.
That could be a big deal if they part ways. It would take a while for another player like Samsung, LG, etc, to build a close relationship with Tesla if that were to happen and another question is if they want to do bulls such a relationship with Tesla given the way they have burned bridges.
Regarding an outsourcing model, they could use a company like Magna to do it. Magna does a lot of the final assembly for many companies already.
They may be forced to if they do go Chapter 11. I think that the whole scenario is a testament of the arrogance of Silicon Valley. They thought that automobile manufacturing was easy and that it would be a cakewalk to disrupt it. It turns out it is a lot harder than they imagined. I think that this sense of arrogance is why Silicon Valley has gotten a bad reputation as of late.