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This seems more like a sneer than a legitimate criticism. AFAIK Tesla's business is fundamentally pretty solid. They make a net profit on their cars, but they a

by chc 10y ago

This seems more like a sneer than a legitimate criticism. AFAIK Tesla's business is fundamentally pretty solid. They make a net profit on their cars, but they are currently investing it all into aggressive expansion. Is it surprising that a young, growing company is spending a lot on growth compared to a century-old company? Do you think it would be better for Tesla if they didn't invest in the future?

rjdagost 10y ago
I admire what Tesla has been able to achieve from a technological and a marketing point of view but I wouldn't call their business "fundamentally solid". Tesla stock has been one of the most heavily shorted equities for some time and it's because their balance sheet is a train wreck while their valuation is sky-high. Tesla burns cash at a phenomenal rate and regularly has to take on debt and / or raise new capital through equity offerings in order to stay in business. Of course they have to invest in the future- automobile manufacturing is a highly competitive, extremely capital intensive business and every OEM (Ford, GM, Toyota, Volkswagen,..) has to regularly invest huge sums of money in staying relevant. Tesla is no different in that regard.
Alupis 10y ago
Unlike Ford, GM, etc... Tesla has a much narrower market potential. Yes Tesla's cars are "cool" and everybody wants one, but even the new "cheaper" model costs far more than the average person spends on a car. Right now, Tesla caters to the luxury market, and is viewed as a "cool alternative" to more traditional luxury makes. Ford, Toyota et al, have models that cover just about every price range and every type of customer, from the extreme budget oriented to the extreme luxury sports car fanatic. Toyota owns Scion, Toyota, and Lexus for example - so if you need a car, chances are one of the Toyota offerings will satisfy your needs and budget. This opens the market potential to include just about every person. The one thing that has worried me about Tesla for a long while, is Musk's claims that next year they'll sell 30% more cars, every year - something that's now proving to be an impossible feat. At some point, they were going to hit a ceiling of maximum potential sales as they attempted to wedge into the already entrenched high-end luxury sports car market - there just aren't enough buyers to keep that growth at these prices.
- jharger 10y ago
  > Yes Tesla's cars are "cool" and everybody wants one, but even the new "cheaper" model costs far more than the average person spends on a car. Where do you get your numbers from, because this[1] seems to be about right at the Tesla price point. [1]: http://mediaroom.kbb.com/record-new-car-transaction-prices-reported-december-2015 http://mediaroom.kbb.com/record-new-car-transaction-prices-r...
  - Alupis 10y ago
    Not a fair comparison. The Model 3 (Tesla's cheapest option) starts at $35,000, which means average price point is well above your link's cited $35,000 (remember, those prices in the link are after upgrades, very few people buy a completely stock vehicle).
- thesmok 10y ago
  > Yes Tesla's cars are "cool" and everybody wants one, but even the new "cheaper" model costs far more than the average person spends on a car. You know, the same was said about the iPhone.
dragontamer 10y ago
> They make a net profit on their cars, but they are currently investing it all into aggressive expansion Citation needed. The numbers I'm looking at are the following: http://ir.tesla.com/secfiling.cfm?filingID=1564590-16-18886&CIK=1318605 http://ir.tesla.com/secfiling.cfm?filingID=1564590-16-18886&... As of March 2016: $ 182,482,000 in Research and Development last Quarter. $ 282,267,000 net loss in the quarter. So even if we got rid of Tesla's ENTIRE R&D department, they lost $100 Million last QUARTER. The primary cost of Tesla is "Selling, general and administrative", which was around $300 Million. The only other cost that's larger than their administrative costs were the $779,316,000 spent on parts. #1 Cost: The parts (~$780 Million) #2 Cost: Selling, General, and Administrative. $300 Million #3 Cost: $182 Million spent on R&D. These numbers are per quarter.
- vonmoltke 10y ago
  The statement you linked clearly shows a gross profit and net loss. "Selling, general and administrative" is not a cost of revenue, hence why it does not count against the gross profit. These are fixed costs not tied to the sales volume that covers the basic operation of the company, advertising, executive compensation, and other overhead costs not directly tied to generating revenue or R&D (since it is a separate line item). Tesla takes in more revenue than their cars cost to build. It currently is not enough to cover all the other expenses of the company.
  - dragontamer 10y ago
    I'm combating the "aggressive expansion" meme that people don't understand. Tesla could stop ALL R&D they're doing and they will still be an unprofitable company.
    - deleted 10y ago
      [deleted]
    - vonmoltke 10y ago
      You specifically referenced a line from the post you are replying to as such: > > They make a net profit on their cars, but they are currently investing it all into aggressive expansion > Citation needed. The citation is right in the statement. They make a gross profit, which means they make a profit on their cars. The in turn spend more on activities that do not involve getting cars to customers. The activities that cause the company to have a net loss are not "cost of revenue" activities. Presumably the majority of that non-revenue expense involves expansion of the company.
delazeur 10y ago
Tesla strikes me as too much of a cult of personality, at least from an investor's perspective. Amazon is another business that reinvests all its profits and then some, but Bezos could walk away without destroying the investment brand. I don't think that's true of Musk and Tesla.

by chc 10y ago

rjdagost 10y ago

I admire what Tesla has been able to achieve from a technological and a marketing point of view but I wouldn't call their business "fundamentally solid". Tesla stock has been one of the most heavily shorted equities for some time and it's because their balance sheet is a train wreck while their valuation is sky-high. Tesla burns cash at a phenomenal rate and regularly has to take on debt and / or raise new capital through equity offerings in order to stay in business. Of course they have to invest in the future- automobile manufacturing is a highly competitive, extremely capital intensive business and every OEM (Ford, GM, Toyota, Volkswagen,..) has to regularly invest huge sums of money in staying relevant. Tesla is no different in that regard.

Alupis 10y ago

Unlike Ford, GM, etc... Tesla has a much narrower market potential. Yes Tesla's cars are "cool" and everybody wants one, but even the new "cheaper" model costs far more than the average person spends on a car. Right now, Tesla caters to the luxury market, and is viewed as a "cool alternative" to more traditional luxury makes. Ford, Toyota et al, have models that cover just about every price range and every type of customer, from the extreme budget oriented to the extreme luxury sports car fanatic. Toyota owns Scion, Toyota, and Lexus for example - so if you need a car, chances are one of the Toyota offerings will satisfy your needs and budget. This opens the market potential to include just about every person. The one thing that has worried me about Tesla for a long while, is Musk's claims that next year they'll sell 30% more cars, every year - something that's now proving to be an impossible feat. At some point, they were going to hit a ceiling of maximum potential sales as they attempted to wedge into the already entrenched high-end luxury sports car market - there just aren't enough buyers to keep that growth at these prices.

jharger 10y ago
> Yes Tesla's cars are "cool" and everybody wants one, but even the new "cheaper" model costs far more than the average person spends on a car. Where do you get your numbers from, because this[1] seems to be about right at the Tesla price point. [1]: http://mediaroom.kbb.com/record-new-car-transaction-prices-reported-december-2015 http://mediaroom.kbb.com/record-new-car-transaction-prices-r...
- Alupis 10y ago
  Not a fair comparison. The Model 3 (Tesla's cheapest option) starts at $35,000, which means average price point is well above your link's cited $35,000 (remember, those prices in the link are after upgrades, very few people buy a completely stock vehicle).
thesmok 10y ago
> Yes Tesla's cars are "cool" and everybody wants one, but even the new "cheaper" model costs far more than the average person spends on a car. You know, the same was said about the iPhone.

dragontamer 10y ago

> They make a net profit on their cars, but they are currently investing it all into aggressive expansion Citation needed. The numbers I'm looking at are the following: http://ir.tesla.com/secfiling.cfm?filingID=1564590-16-18886&CIK=1318605 http://ir.tesla.com/secfiling.cfm?filingID=1564590-16-18886&... As of March 2016: $ 182,482,000 in Research and Development last Quarter. $ 282,267,000 net loss in the quarter. So even if we got rid of Tesla's ENTIRE R&D department, they lost $100 Million last QUARTER. The primary cost of Tesla is "Selling, general and administrative", which was around $300 Million. The only other cost that's larger than their administrative costs were the $779,316,000 spent on parts. #1 Cost: The parts (~$780 Million) #2 Cost: Selling, General, and Administrative. $300 Million #3 Cost: $182 Million spent on R&D. These numbers are per quarter.

vonmoltke 10y ago
The statement you linked clearly shows a gross profit and net loss. "Selling, general and administrative" is not a cost of revenue, hence why it does not count against the gross profit. These are fixed costs not tied to the sales volume that covers the basic operation of the company, advertising, executive compensation, and other overhead costs not directly tied to generating revenue or R&D (since it is a separate line item). Tesla takes in more revenue than their cars cost to build. It currently is not enough to cover all the other expenses of the company.
- dragontamer 10y ago
  I'm combating the "aggressive expansion" meme that people don't understand. Tesla could stop ALL R&D they're doing and they will still be an unprofitable company.
  - deleted 10y ago
    [deleted]
  - vonmoltke 10y ago
    You specifically referenced a line from the post you are replying to as such: > > They make a net profit on their cars, but they are currently investing it all into aggressive expansion > Citation needed. The citation is right in the statement. They make a gross profit, which means they make a profit on their cars. The in turn spend more on activities that do not involve getting cars to customers. The activities that cause the company to have a net loss are not "cost of revenue" activities. Presumably the majority of that non-revenue expense involves expansion of the company.

delazeur 10y ago

Tesla strikes me as too much of a cult of personality, at least from an investor's perspective. Amazon is another business that reinvests all its profits and then some, but Bezos could walk away without destroying the investment brand. I don't think that's true of Musk and Tesla.