TSLA corporate outlook

Putting down a grand to get in line for a model 3 with a shadow of doubt your deposit is secure is one thing, prepaying a quarter of a million dollars for a car you aren't expecting to see for three years is a game for Cloud Minders. I guess there are easily a thousand people in silicon valley for whom that kind of expenditure is the equivalent of me ordering a beer.

Some have commented that TSLA's too little, too late model 3 production is no big deal, revealing their lack of understanding of the dimensions of TSLA's revenue deficit, and the number of model 3 sales required to bring TSLA to profitability.

TSLA's biggest problem is not that it will remain unprofitable if the model 3 is not successful.

TSLA's biggest problem is that it will probably remain unprofitable, even if the 3 is incredibly successful, and it sells hundreds of thousands of model 3's next year at the ~$45,000 average sales price it has claimed it (still) will.

The commentator below illustrates the depth of the hole TSLA has dug, by plugging many different and highly optimistic numbers into the model, and showing just how elusive profitability will be.

Even With Model 3 Success, Tesla Is Structurally Bankrupt

...Let's get right to the point. Even with a successful Model 3 ramp, Tesla remains structurally bankrupt.

Before I go through the numbers, let me explain what CoverDrive means by “structurally bankrupt.” Let’s begin with what it does not mean.

It does not mean Tesla will file for bankruptcy in 2018. On numerous occasions over the past five years, capital infusions have revived Tesla from blue-faced incipient bankruptcy to ruddy solvency, and there is no reason to believe that won’t happen again.

The mostly likely capital infusion will come by means of an equity issuance in the public equity market. Also possible is a private infusion, most likely from a wealthy overseas source (think Tencent (OTCPK:TCEHY)), but possibly some U.S. multi-billionaire.

Either way, Tesla shareholders will suffer more dilution...

“Structurally bankrupt” means that even after achieving volume Model 3 production, Tesla will continue to hang on as it has hung on since it first was formed: incapable of generating any free cash flow, and therefore utterly dependent on continued capital infusions for its survival.

So, what’s the big deal if Tesla just continues along as it has done in the past?

The big deal is that, up until now, the story has been that the Model 3 is not only the culmination of Tesla’s mission (an EV for the masses), but also the product that will transform Tesla into a profitable enterprise.

Indeed, with a $50 billion market capitalization, the belief is that the Model 3 will transform Tesla into a hugely profitable enterprise...

Taken as a whole, CoverDrive’s model forecasts 2018 GAAP losses of $2 billion, even assuming a successful Model 3 rollout...

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https://seekingalpha.com/article/4126264-even-model-3-success-tesla-structurally-bankrupt

You do realize they let just about anyone write for that site, correct? You really have to be careful where you get your news sources from these days.

hyperionmark said:

You do realize they let just about anyone write for that site, correct? You really have to be careful where you get your news sources from these days.

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Correct. I did not see anything written that supported any of the statements made by the author. He simply states they will not make money selling cars (period). I'd like to hear how he arrived at this conclusion, assuming that he is working with some facts, and not just his feelings about Tesla.

edit: ok I clicked on the link to see if there were real numbers in the article. There were. The author assumes that Tesla is only going to have an average run rate in 2018 of 1250 cars/week. They are clearly targeting higher run rates, and most of the "data" I saw posted seemed to be just pulled out of thin air. Definitely not something I'm going to worry about. Thanks (ed) for posting information on the naysayers, but I'd appreciate some sorting some of these, so we don't have to read every crazy writer, just the credible ones.

palmermd said:

...ok I clicked on the link to see if there were real numbers in the article. There were. The author assumes that Tesla is only going to have an average run rate in 2018 of 1250 cars/week...

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You are mistaken.

Evidently you did not read the entire article, where the Q4 2018 losses are projected with higher, ~5 k and ~7.7 k weekly model 3 sales:

Now, let’s take a look at things at the end of 2018, assuming Tesla is producing 5,000 Model 3 cars per week, with mature gross margins, and having once again bumped up production of the Model S and Model X..

A better picture, to be sure, but better only in the sense of smaller losses...

What If CoverDrive Has Not Been Optimistic Enough?

What, indeed? Let’s add a dollop or two of optimism to CoverDrive’s forecasts.

How about we have Tesla sell 100,000 Model 3s in Q4 instead of 65,000? Here you go...

Well, that didn’t help much, and besides, the idea of 100,000 Model 3s in Q4 is really outlandish...

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https://seekingalpha.com/article/4126264-even-model-3-success-tesla-structurally-bankrupt

Is anybody at TSLA, or any analyst pimping its stock, claiming any quarterly profits in 2018 (other than from a replay of a stunt, such as recognizing many quarters of CARB ZEV credit sales in one quarter) much less a profit for the full year 2018?

I thought that delusion ended at the last conference call, along with the farcical claim of "10,000 Model 3 sales per week" ...

edatoakrun said:

TSLA's biggest problem is that it will probably remain unprofitable, even if the 3 is incredibly successful, and it sells hundreds of thousands of model 3's next year at the ~$45,000 average sales price it has claimed it (still) will.

“Structurally bankrupt” means that even after achieving volume Model 3 production, Tesla will continue to hang on as it has hung on since it first was formed: incapable of generating any free cash flow, and therefore utterly dependent on continued capital infusions for its survival.

So, what’s the big deal if Tesla just continues along as it has done in the past?

The big deal is that, up until now, the story has been that the Model 3 is not only the culmination of Tesla’s mission (an EV for the masses), but also the product that will transform Tesla into a profitable enterprise.

Indeed, with a $50 billion market capitalization, the belief is that the Model 3 will transform Tesla into a hugely profitable enterprise...

https://seekingalpha.com/article/4126264-even-model-3-success-tesla-structurally-bankrupt

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That explains it succinctly! Since Tesla can't be profitable selling a low volume vehicle (MS) at a high price, they won't be
profitable selling basically the same vehicle (M3) at a higher volume with the same overall cost structure as the MS at a
marginally lower price than the MS.

Wow, you guys have it all figured out! You are so much more intelligent than anyone else. Congrats on being awesome! Can I borrow some of the money you will make when Tesla goes to zero?

Haha, this is a complete comedy show and I truly hope that you guys realize there are only about 2, maybe 3, people in here that take anything you guys say seriously.

It's really funny and entertaining. So...thanks! I love the comedy of doom and gloom. Keep it up. I wonder if Tesla knows they suck...

Financial journalist seem to be struggling to describe just how fast the cash is being sent to hell at TSLA:

Tesla’s Burning Through Nearly Half a Million Dollars Every Hour

Elon Musk said last week that Tesla Inc. is designing a new sports car that could go from zero to 60 mph in 1.9 seconds. Not bad, but here’s a speed number that investors might want to focus on instead:

Over the past 12 months, the electric-car maker has been burning money at a clip of about $8,000 a minute (or $480,000 an hour), Bloomberg data show. At this pace, the company is on track to exhaust its current cash pile on Monday, Aug. 6. (At 2:17 a.m. New York time, if you really want to be precise.)

To be fair, few Tesla watchers expect the cash burn to continue at quite such a breakneck pace, and the company itself says it’s ramping up output of its all-important Model 3, which will bring money in the door. Investors don’t seem concerned...

“Whether they can last another 10 months or a year, he needs money, and quickly,” said Kevin Tynan, senior analyst with Bloomberg Intelligence, who estimates Tesla will be required to raise at least $2 billion in fresh capital by mid-2018...

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https://www.bloomberg.com/news/articles/2017-11-21/tesla-is-blowing-through-8-000-every-minute-amid-model-3-woes

Fortune's headline finds the correct simile?

Tesla Is Burning Through a Bitcoin Every Minute

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http://fortune.com/2017/11/22/tesla-bitcoin-cash-burn-model-3/

edatoakrun said:

Financial journalist seem to be struggling to describe just how fast the cash is being sent to hell at TSLA:

Tesla’s Burning Through Nearly Half a Million Dollars Every Hour

Elon Musk said last week that Tesla Inc. is designing a new sports car that could go from zero to 60 mph in 1.9 seconds. Not bad, but here’s a speed number that investors might want to focus on instead:

Over the past 12 months, the electric-car maker has been burning money at a clip of about $8,000 a minute (or $480,000 an hour), Bloomberg data show. At this pace, the company is on track to exhaust its current cash pile on Monday, Aug. 6. (At 2:17 a.m. New York time, if you really want to be precise.)

To be fair, few Tesla watchers expect the cash burn to continue at quite such a breakneck pace, and the company itself says it’s ramping up output of its all-important Model 3, which will bring money in the door. Investors don’t seem concerned...

“Whether they can last another 10 months or a year, he needs money, and quickly,” said Kevin Tynan, senior analyst with Bloomberg Intelligence, who estimates Tesla will be required to raise at least $2 billion in fresh capital by mid-2018...

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https://www.bloomberg.com/news/articles/2017-11-21/tesla-is-blowing-through-8-000-every-minute-amid-model-3-woes

Fortune's headline finds the correct simile?

Tesla Is Burning Through a Bitcoin Every Minute

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http://fortune.com/2017/11/22/tesla-bitcoin-cash-burn-model-3/

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Because they know weak minded people like to read those articles. Clickbait 101. Pretty easy money.

well, we could do rumors.

Rumor has it that Musk earned so much confidence in the BIG money crowd that he has a HUGE line of credit at his disposal at any time.

This I can see. There is a reason why Tesla spends money like the federal government and that is because they have a safety net but its not even really that, its simply a hidden foundation that we will likely never know the strength and reach of.

You think they survive on car sales because I don't see that happening... EVER. But this trucking thing? That is a gold mine!

Tesliacs are starting to defend TSLA's impending financial collapse as a noble lost cause.

Not an uncommon occurrence, to those who cannot come to terms with the greed and selfishness that led to their own failure.

In praise of Tesla’s bankruptcy

...A lot of people think bankruptcy looms in Tesla’s future. Of course, Tesla bears have been saying this for years, and they’ve consistently been wrong — but this time, are they right?

Maybe; maybe not. Either way, a far more interesting question, if (like me) you have no financial interest in the business’s success or failure, is: does it matter?

I’m entirely serious. We tend to assume that a company’s purpose is to make money for its shareholders, or at least “not go bankrupt,” because money is how we measure success. And this is in fact true of most companies. But it is not true of Tesla. “When a measure becomes a target, it ceases to be a good measure,” and this is as true of money as it is of any other measure. The purpose of Tesla is not to make money; it is to pioneer fleets of smart mass-market electric cars, and the infrastructure to support them, and battery technology which is not limited to cars. Making money is ancillary...

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https://techcrunch.com/2017/11/26/in-praise-of-teslas-bankruptcy/

DaveinOlyWA said:

...Rumor has it that Musk earned so much confidence in the BIG money crowd that he has a HUGE line of credit at his disposal at any time...

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If anyone with money had any confidence in TSLA, its bonds would not be trading today as low-grade junk.

DaveinOlyWA said:

...this trucking thing? That is a gold mine!...

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The idiocy of the TSLA Semi program belongs on it's own thread, IMO.

Weak minded drivel like the rest of the stuff you post. You seem like you have a real good grasp on financial matters. Please tell us what you do for a living. hahaha

https://teslamotorsclub.com/blog/2017/11/28/optimistic-elon-musks-moonshot-method/

nice article about Tesla/Musk and timelines. I like this quote

Patrick0101 said:

Seeking Alpha writer, Trent Eady, said it well when he wrote, “If Musk promises you the moon in six months and delivers it in three years, keep things in perspective: you’ve got the moon.”

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edatoakrun said:

Tesliacs are starting to defend TSLA's impending financial collapse as a noble lost cause..

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Actually, plenty of people have been saying that for a year or two now. After all, Tesla has more or less single-handedly made the rest of the auto industry take BEVs seriously, by building a compelling car that non-EV enthusiasts could desire along with the charging infrastructure to support it, and they're well along the way to achieving their ultimate goal:

Our goal when we created Tesla a decade ago was the same as it is today: to accelerate the advent of sustainable transport by bringing compelling mass market electric cars to market as soon as possible.

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Whether or not Tesla itself survives as a company and manages to introduce mass market cars, mass market BEVs undoubtedly will arrive, largely thanks to them demonstrating what could be done.

I am a Leaf owner who will NOT be buying a Tesla any time soon, but I follow the company because I’m very interested in the industry as a whole. I used to think that Tesla could not possibly justify their valuation, and that their entire business was an inevitable failure. Now, I’m thinking much, much differently. People focus too much on Market Cap and Cash Burn - the two main criticisms of the company. After looking closer at the numbers, they seem like less of a red flag.
Think about the number of cars Tesla will eventually sell per year. Given the global sales of the BMW 3-series, Mercedes C-Class, and Audi A4, it is not unreasonable to expect the model 3 to consistently sell 400K-500K units per year. If you take these sales alone and project their sales margins out a few years, the market cap doesn’t look so bad, AND the current cash burn becomes irrelevant. It’s fair to say that the current margins cannot be maintained, but it’s just as fair to point to Apple and Porsche and say, “Oh yes they can.” Brand Power is everything, and Tesla has it. If they add a few more models to their lineup and simply compete with their segment peers across all models, they will easily justify their market cap.
This isn’t even considering the possibility that Tesla eventually creates a cheaper nameplate. As battery price comes down and EVs become more mainstream, Tesla will want a piece of the sub-$25K market. There’s at least a strong chance that they could compete very well with whatever EVs VW, Toyota and the Big 3 put out in 2025.
Now, let’s talk about Tesla’s other businesses. Solar - okay let’s not talk about that one -but let’s do talk about energy storage. I work in the energy industry and I get the feeling that the average person has no idea how big this technology is, and how much it will BOOM over the next 10 years. As large fossil and nuclear plants are shuddered the grid will need to be stabilized. The only way to do this is with energy storage, and regardless of the capital cost it is CHEAP!!!!! compared to most utility expenditures. This doesn’t even consider home storage, which may or may not be a huge industry as well. Either way Tesla at least competes in these markets, and very possibly dominates them.
Just my thoughts, and would love some thoughtful counter-points. I’m not a genius.

This article was posted above but some of you may not have read it. It is actually *not* an article arguing about why Tesla must be a failure. It's basically saying that if they fail, it won't matter, because "whether or not they are making money, they are succeeding at their purpose."

In Praise of Tesla’s Bankruptcy
https://techcrunch.com/2017/11/26/in-praise-of-teslas-bankruptcy/

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The existential TSLA question?

How long can a car company survive, if it never learns how to build cars efficiently in the first place?

Build fast, fix later: speed hurts quality at Tesla, some workers say

...After Tesla’s Model S sedans and Model X SUVs roll off the company’s Fremont, California assembly line, the electric vehicles usually make another stop - for repairs, nine current and former employees have told Reuters.

The luxury cars regularly require fixes before they can leave the factory, according to the workers. Quality checks have routinely revealed defects in more than 90 percent of Model S and Model X vehicles inspected after assembly, these individuals said, citing figures from Tesla’s internal tracking system as recently as October...

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https://www.reuters.com/article/us-tesla-quality-insight/build-fast-fix-later-speed-hurts-quality-at-tesla-some-workers-say-idUSKBN1DT0N3

The very low productivity of TSLA's operations, resulting in huge financial losses and poor quality have been tolerated by shareholders and high-priced car buyers so far, but how do you scale labor-intensive hand-built production processes with a vehicle that are claimed to be available (eventually) at a "more affordable" price, only ~$35,000?

Tesla's Production Problems Are The Company's Achilles' Heel

...I often wondered how it is possible for Tesla to burn so much cash while making only luxury cars--the Model S and Model X--and the Reuters story--quoting recently fired Tesla employees--opened a window on that process. The extensive re-work referenced in the article just should not be occurring now, especially since the Model S is entering its sixth year of production.

Some elements of the car buying public like to fall for the "it was made by hand" rhetoric for luxury models, but I can confirm that no automaker in the world aims for less automation, not more. This is especially true as one goes up the curve in terms of volume, and that is the problem facing Tesla now.

The company has shown no evidence that it can produce luxury cars at a proper linespeed and now it is attempting to build a mass-market vehicle, the Model 3...

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https://www.forbes.com/sites/jimcollins/2017/11/30/teslas-production-problems-are-the-companys-achilles-heel/#7981e94a71a2

edatoakrun said:

how do you scale labor-intensive hand-built production processes with a vehicle that are claimed to be available (eventually) at a "more affordable" price, only ~$35,000?

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You don't. And they never planned to. A year from now, no Model 3s will be hand-built. They will buzz off the line after being assembled by a swarm of robots. Yet you will be on to your next rant, and probably still won't even realize how absurd this claim is.

GRA said:

...Whether or not Tesla itself survives as a company and manages to introduce mass market cars, mass market BEVs undoubtedly will arrive, largely thanks to them demonstrating what could be done.

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TSLA has never built any "mass market BEVs", as defined by relatively high production levels and low price, and may never build any.

I am one of millions of drivers world-wide who actually do drive "mass-market BEVs", in my case since early 2011.

I doubt the large majority of those who drive BEVS were significantly influenced by TSLA, even if they, like many misguided ICEV drivers, see some achievement in TSLA's failures.

I don't see how it is possible find any plausible rational counterfactual argument that the billions of dollars flushed down TSLA these many years could not have been far more productively invested in BEV production, under more competent management.