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I'm getting a little tired of these "burning through money" reports. Of course they're burning through money. They're setting up a factory that is planned to pr
by ricw 9y ago
I'm getting a little tired of these "burning through money" reports. Of course they're burning through money. They're setting up a factory that is planned to produce 5000 cars a week. This costs a lot of capex money up-front, and is a standard thing for any car manufacturer to do. They have to buy tens of thousands of expensive parts, resources, robots, pay all the staff, all while not selling very many cars while the ramp up is ongoing.
"By this calculation, Tesla would exhaust cash on Aug. 6". This is assuming they keep on selling any or negligible amount of Model 3's. Even if they only sell 100k Model 3 cars next year, their revenue will increase by $3.4B. Their aim is to sell 250k cars next year. They're a couple of months late. Shouldn't be a big deal though..
Bottom line: You have to spend money to make money. This is totally normal and expected. No need to worry unless the ramp up totally shuts down.
- api 9y agoIt's financial capitalist ideology. They're actually investing in capital to actually do things in real three-dimensional reality. That's bad business. You're supposed to liquidate, outsource, arbitrage, make money off credit schemes, and otherwise just move money around.
- mjevans 9y agoI understand your tongue in cheek jest about the typical MBA strategy for pumping and dumping the value in a business so that they can get their quarterly performance bonuses or cash of future equity today (and then exit the stage before the business crashes in to a fireball of liquidation)... Long term strategy used to be what //investing// was actually about.
- alexasmyths 9y ago"about the typical MBA strategy for pumping and dumping" There is nothing typically - or even remotely 'MBA' about this statement.
- xchaotic 9y agoThis is true, but they issued all forms of debt already - shares, bonds, you name it. Any further delays and they can literally go bankrupt. And this is physical manufacturing do you can't ship beta and fix later for most things. Also many have vested interests to see them fail - short traders, other car manufacturers, oil industry. I wouldn't rule out a simple sabotage - seems fairly low risk if it means oil industry can keep extracting profits for 10 years longer.
- asdfasdfas112 9y agobankrupt within the next year? no chance.
- ccorda 9y agoThree months ago they were oversubscribed for their debt offering. It might cost a little higher rate, but if they need more money they can get it and they're not going bankrupt. The well isn't dry. To put numbers on it, Tesla projects by end of next year to be producing 10,000 Model 3 a week at an average price of $42,500 with 25% gross margins. That is $106,250,000 per week in gross profits. Over 50 weeks, that's 5.3B in gross profits and over 21B in revenue. They have high SG&A relative to other automakers, but there will be plenty of cash flow to fund further ambitions and pay off the debt it took to get them there unless they're grossly overstating profitability, capacity, or demand.
- thisisit 9y agoProducing is not same as profits, sure it can be considered assets in form of "finished goods" but not real profit until they sell all the cars.
- rcMgD2BwE72F 9y agoWhat issues have been reported so far other than production bottlenecks?
- senectus1 9y agothey just borrow to pay off and set their debt deadline further back a bit.
- Animats 9y agoThey're setting up a factory that is planned to produce 5000 cars a week. It's only produced about 500 Model 3 cars total so far. Total, not per week. The financial press is getting worried.[1] Tesla has very serious production problems. They thought they could bring up a high-volume production line much faster than the big auto companies do. They can't. Tesla might end up being acquired by some company that knows how to run an auto plant. [1] http://www.businessinsider.com/tesla-semi-truck-model-3-woes-will-offset-goldman-sachs-2017-11 http://www.businessinsider.com/tesla-semi-truck-model-3-woes...