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Those production targets were established for a reason. Tesla is burning unbelievable amounts of cash [0], and they need to convince investors and bond holders

Those production targets were established for a reason. Tesla is burning unbelievable amounts of cash [0], and they need to convince investors and bond holders that they will break this trend soon. Showing very agressive production targets for M3 is the only way to do it. [0] https://arstechnica.com/cars/2018/02/tesla-loses-another-675-million-in-q4-its-biggest-quarterly-loss-yet/ https://arstechnica.com/cars/2018/02/tesla-loses-another-675... "Tesla loses another $675 million in Q4, its biggest quarterly loss yet"

deleted 9y ago
[deleted]
slg 9y ago
Tesla's bond offerings are routinely oversubscribed. The market is clearly willing to continue to give them more and more money. I therefore find the idea dubious that Tesla needed to be super aggressive with their production targets or else they would run out of cash.
- jacques_chester 9y ago
  > Tesla's bond offerings are routinely oversubscribed. Historically, this does not count for much. Business history is littered with the bones of infallible stars that just needed a little cash to tide them over.
- nopriorarrests 9y ago
  If I recall correctly, their last offering was more or less positioned like "according to our production estimates, this is, probably, last time we ask capital markets for cash infusion", and it was at the height of excitement about the Model 3. As of now, however, these bonds (1.8bln, issued last August) are trading underwater [0]. They will probably tap the market once again this year, and we will see what happen. [0] https://www.marketwatch.com/story/teslas-junk-bonds-are-trading-under-water-and-it-could-spell-trouble-for-elon-musk-2017-11-10 https://www.marketwatch.com/story/teslas-junk-bonds-are-trad...
  - slg 9y ago
    Those were junk bonds in August. Tesla is still having success with other types of bonds. Here is a more recent offering from January with lease backed bonds [1]. Tesla sold $546m worth but had orders for roughly $7b. [1] - https://www.bloomberg.com/news/articles/2018-01-31/when-it-comes-to-tesla-car-bonds-buyers-simply-can-t-get-enough https://www.bloomberg.com/news/articles/2018-01-31/when-it-c...
    - Nokinside 9y ago
      Lease backed bonds don't scale. He can't tap to lease again and again. Tesla is burning $4.2 billion per year now.
      - nopriorarrests 9y ago
        >Tesla is burning $4.2 billion per year now. Where is this number is coming from? Their 2017 loss was around 2 billions, half of what you say.
        Nokinside 9y ago
        It comes from Barclay's analysis (they are very bearish). Model 3 is not small volume luxury car as previous models. They are investing wast sums for large scale production. Burning trough vast amounts of cash is OK only as long as the production volume ramp up really happens in limited time frame and quality and recall numbers are similar to Audi 4A. Tesla must ramp up the production volume within a year or Tesla is financially in the ropes. If Tesla pays back debt $1000 for every car it sells. It must sell 4 million cars to pay this year's projected cash burn. Tesla made a bet that it can become large car manufacturer with Model 3, there will be no second changes.

deleted 9y ago

[deleted]

slg 9y ago

Tesla's bond offerings are routinely oversubscribed. The market is clearly willing to continue to give them more and more money. I therefore find the idea dubious that Tesla needed to be super aggressive with their production targets or else they would run out of cash.

jacques_chester 9y ago
> Tesla's bond offerings are routinely oversubscribed. Historically, this does not count for much. Business history is littered with the bones of infallible stars that just needed a little cash to tide them over.
nopriorarrests 9y ago
If I recall correctly, their last offering was more or less positioned like "according to our production estimates, this is, probably, last time we ask capital markets for cash infusion", and it was at the height of excitement about the Model 3. As of now, however, these bonds (1.8bln, issued last August) are trading underwater [0]. They will probably tap the market once again this year, and we will see what happen. [0] https://www.marketwatch.com/story/teslas-junk-bonds-are-trading-under-water-and-it-could-spell-trouble-for-elon-musk-2017-11-10 https://www.marketwatch.com/story/teslas-junk-bonds-are-trad...
- slg 9y ago
  Those were junk bonds in August. Tesla is still having success with other types of bonds. Here is a more recent offering from January with lease backed bonds [1]. Tesla sold $546m worth but had orders for roughly $7b. [1] - https://www.bloomberg.com/news/articles/2018-01-31/when-it-comes-to-tesla-car-bonds-buyers-simply-can-t-get-enough https://www.bloomberg.com/news/articles/2018-01-31/when-it-c...
  - Nokinside 9y ago
    Lease backed bonds don't scale. He can't tap to lease again and again. Tesla is burning $4.2 billion per year now.
    - nopriorarrests 9y ago
      >Tesla is burning $4.2 billion per year now. Where is this number is coming from? Their 2017 loss was around 2 billions, half of what you say.
      - Nokinside 9y ago
        It comes from Barclay's analysis (they are very bearish). Model 3 is not small volume luxury car as previous models. They are investing wast sums for large scale production. Burning trough vast amounts of cash is OK only as long as the production volume ramp up really happens in limited time frame and quality and recall numbers are similar to Audi 4A. Tesla must ramp up the production volume within a year or Tesla is financially in the ropes. If Tesla pays back debt $1000 for every car it sells. It must sell 4 million cars to pay this year's projected cash burn. Tesla made a bet that it can become large car manufacturer with Model 3, there will be no second changes.