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While I'm a huge fan of Elon Musk, and I even think Tesla is pretty cool, I'm a little underwhelmed. Every one of my ventures could be cash flow positive if I

by tjic 14y ago

While I'm a huge fan of Elon Musk, and I even think Tesla is pretty cool, I'm a little underwhelmed. Every one of my ventures could be cash flow positive if I got a half BILLION dollar loan from the taxpayers and then was able to sell my product with a $8k tax credit stapled to the side of each unit. http://techcrunch.com/2009/06/23/the-government-comes-through-for-tesla-with-a-465-million-loan-for-its-electric-sedan/ http://techcrunch.com/2009/06/23/the-government-comes-throug...

w1ntermute 14y ago
That's rather disingenuous. Musk is selling an innovative product worth tens of thousands of dollars to individual consumers. Considering the engineering that had to go into making the Model S a reality, I would consider this very impressive. Moreover, there is no reason to think that Tesla will not continue to increase in profitability with each passing week.
- perry5000 14y ago
  Cash flow positive != profitable
  - BCM43 14y ago
    What does it mean?
    - frankc 14y ago
      cash flow positive just means you had more money coming in that going out. Profit is calculated on an accrual basis, not a cash flow basis. For instance, if I sell you a car, I can recognize the revenue from that before you give me the cash. The debt you owe me is now an asset. On the other hand, there are things like depreciation of assets which count as expenses even though no cash changes hands right now. These are just a couple of examples on how cash flow and profit are not the same, but to get the full gist of it, you need to cover basically what gets covered in an intro accounting course.
  - jervisfm 14y ago
    What is the difference between the two ? Don't you need to have a net positive flow in order to be profitable ?
    - slap_shot 14y ago
      http://www.investopedia.com/articles/01/110701.asp#axzz2EC5J5aQ4 http://www.investopedia.com/articles/01/110701.asp#axzz2EC5J...
    - deleted 14y ago
      [deleted]
    - nhebb 14y ago
      An explanation is given in the Operating Cash Flow vs. Net Income, EBIT, and EBITDA section of this Wikipedia entry: http://en.wikipedia.org/wiki/Operating_cash_flow http://en.wikipedia.org/wiki/Operating_cash_flow
    - ChuckMcM 14y ago
      Being operationally cash flow positive means that on a day to day basis your bank balance is increasing. Being profitable means that all of the money comes in in greater than your total costs. So for example, if you look at HP's write down, they were operationally cash flow positive for the quarter but are 'writing off' 8+ billion dollars. So they "lost" over $8B this quarter. Aka not profitable during the quarter. So the milestones you look for as a company are that you are cash flow positive for the day (all of todays costs covered by revenue), cash flow positive for the quarter (net increase in cash on and over the quarter) and cash flow positive for the year (net cash increase for the year), and finally profitable (total income exceeded all costs, both tangible and intangible (like depreciation)).
      - TeMPOraL 14y ago
        So to put it simply, cash flow is like a differential of profit? So you can have a profit of -1M$, but as long as the next month you get more (like -0.8M$), you're cash flow positive (+0.2M$), right? I'm having trouble parsing the examples given in this thread; the above sounds like what I more-less understood from them.
rohansingh 14y ago
Nothing stopping you from doing a venture that takes advantage of federal grants and tax incentives.
- perry5000 14y ago
  $500M taxpayer-backed loans are available to anyone, now?
  - sp332 14y ago
    Instructions to sign up are right over here http://www.lgprogram.energy.gov/ http://www.lgprogram.energy.gov/
    - ImprovedSilence 14y ago
      It looks like ford has about 5B in loans from them. And Fisker Automotive has a lil more than Tesla in loans. and Fisker makes some damn sexy cars: https://www.google.com/search?q=fisker&oe=utf-8&aq=t&rls=org.mozilla:en-US:official&client=firefox-a&um=1&ie=UTF-8&hl=en&tbm=isch&source=og&sa=N&tab=wi&ei=XYC_UPXzH4680QGgxICQDg&biw=1280&bih=863&sei=aoC_UOvtN8bJ0QHlioDwDg https://www.google.com/search?q=fisker&oe=utf-8&aq=t...
      - timdorr 14y ago
        Yep, they're definitely hot cars: http://jalopnik.com/5956179/more-than-a-dozen-fisker-karma-hybrids-caught-fire-and-exploded-in-new-jersey-port-after-sandy http://jalopnik.com/5956179/more-than-a-dozen-fisker-karma-h... </snark>
        patrickk 14y ago
        Elon Musk doesn't regard Fisker as a serious competitor. He said something like: "Fisker is headed up by a car designer, not an engineer. The reason we haven't had electric cars isn't because they looked bad" (or words to that effect).
j2bax 14y ago
Considering what he's up against in the industry, I'd say what he's done is fairly remarkable. My concern would be that if at any point one of the big three see Tesla as a threat they will put efforts into creating an electric car that undercuts Tesla's offerings and catapults Tesla into a high end niche oblivion. That said, if it comes to that, I will see that as a different means to the same end of reducing our gas guzzling obsession in America, and I can only see that as a positive.
- rikf 14y ago
  I think you would be surprised I think Tesla's strategy has three stages. 1) Niche high cost vehicle sold in low volumes(Roadster) 2) Medium cost luxury vehicle sold in medium volumes(Model S) 3) Low cost high volume vehicle sold in high volumes. (Model ???) Obviously this is a gross over simplification but I imagine that part of the engineering that is going on at TESLA is figuring out how to build 3 cheaper and at a higher quality then anybody else.
  - j2bax 14y ago
    I am aware of their strategy, I just worry that the big automakers with their massive distribution and infrastructures already in place could easily come in and be 10 steps ahead of Tesla and provide a vehicle that isn't as sexy but has the same appeal to the electric car market. I could be overestimating their ability to innovate after so many years of sitting on the same old tired technology, but something tells me that they'd be willing to step up if it means they are going to be completely left in the dust of a tiny (by comparison) company.
    - alxndr 14y ago
      "the big automakers ... could easily come in and be 10 steps ahead of Tesla and provide a vehicle that isn't as sexy but has the same appeal to the electric car market" Aren't they already trying to do that? Chevy's Volt, Nissan's Leaf, Ford apparently makes a fully PEV Focus now, as does Honda with a version of the Fit, and Toyota's gotta be working on the Prius...
brandall10 14y ago
Do you have any idea whatsoever how hard it is to have a successful venture in the automotive industry? You really should watch the Bloomberg Risk Takers documentary on Elon. I'm against handouts as much as anyone (it's a loan though), but try making a comment like this afterward. The difficulties he went thru to keep Tesla afloat were outrageous. By this time he been dumping his fortune into both this and SpaceX and was essentially at the point of personal bankruptcy (ie. was friends/associates time to keep moving, no one was willing to continue investing). Note in the article the sentence "Last month, Mercedes’ parent company Daimler also invested $50 million for a 10 percent stake in Tesla." Do yourself a favor and learn what Tesla actually did to make this happen. Yes, you may have heard they retrofitted Smart Cars with the Tesla power train, but how they did that is a breathtaking example of innovation and teamwork for a company at the brink of death. In short, this loan saved the company. This article we're discussing right now would not exist. Tesla Motors would be another footnote in history that people could point to - "automotive startups are a losing proposition, do not invest". Would you rather the government bet on a guy like Elon who's actually putting his all into carrying out on a promise to change the game, or industry stalwarts who pissed away good will by incompetence and greed?
- thematt 14y ago
  How about a third option? The government doesn't bet on anybody and let's the market sort out the winners.
  - benajnim 14y ago
    While this would be a good option in the spirit of the free market, many parts of the transportation industry are subsidized already making the play-field unfair to begin with.
  - king_magic 14y ago
    Does the market always pick the highest quality of winners? I really don't think it does. I'm not saying government does either - TBH I don't really have faith in either the market or the government to accurately pick winners.

by tjic 14y ago

w1ntermute 14y ago

That's rather disingenuous. Musk is selling an innovative product worth tens of thousands of dollars to individual consumers. Considering the engineering that had to go into making the Model S a reality, I would consider this very impressive. Moreover, there is no reason to think that Tesla will not continue to increase in profitability with each passing week.

perry5000 14y ago
Cash flow positive != profitable
- BCM43 14y ago
  What does it mean?
  - frankc 14y ago
    cash flow positive just means you had more money coming in that going out. Profit is calculated on an accrual basis, not a cash flow basis. For instance, if I sell you a car, I can recognize the revenue from that before you give me the cash. The debt you owe me is now an asset. On the other hand, there are things like depreciation of assets which count as expenses even though no cash changes hands right now. These are just a couple of examples on how cash flow and profit are not the same, but to get the full gist of it, you need to cover basically what gets covered in an intro accounting course.
- jervisfm 14y ago
  What is the difference between the two ? Don't you need to have a net positive flow in order to be profitable ?
  - slap_shot 14y ago
    http://www.investopedia.com/articles/01/110701.asp#axzz2EC5J5aQ4 http://www.investopedia.com/articles/01/110701.asp#axzz2EC5J...
  - deleted 14y ago
    [deleted]
  - nhebb 14y ago
    An explanation is given in the Operating Cash Flow vs. Net Income, EBIT, and EBITDA section of this Wikipedia entry: http://en.wikipedia.org/wiki/Operating_cash_flow http://en.wikipedia.org/wiki/Operating_cash_flow
  - ChuckMcM 14y ago
    Being operationally cash flow positive means that on a day to day basis your bank balance is increasing. Being profitable means that all of the money comes in in greater than your total costs. So for example, if you look at HP's write down, they were operationally cash flow positive for the quarter but are 'writing off' 8+ billion dollars. So they "lost" over $8B this quarter. Aka not profitable during the quarter. So the milestones you look for as a company are that you are cash flow positive for the day (all of todays costs covered by revenue), cash flow positive for the quarter (net increase in cash on and over the quarter) and cash flow positive for the year (net cash increase for the year), and finally profitable (total income exceeded all costs, both tangible and intangible (like depreciation)).
    - TeMPOraL 14y ago
      So to put it simply, cash flow is like a differential of profit? So you can have a profit of -1M$, but as long as the next month you get more (like -0.8M$), you're cash flow positive (+0.2M$), right? I'm having trouble parsing the examples given in this thread; the above sounds like what I more-less understood from them.

rohansingh 14y ago

Nothing stopping you from doing a venture that takes advantage of federal grants and tax incentives.

perry5000 14y ago
$500M taxpayer-backed loans are available to anyone, now?
- sp332 14y ago
  Instructions to sign up are right over here http://www.lgprogram.energy.gov/ http://www.lgprogram.energy.gov/
  - ImprovedSilence 14y ago
    It looks like ford has about 5B in loans from them. And Fisker Automotive has a lil more than Tesla in loans. and Fisker makes some damn sexy cars: https://www.google.com/search?q=fisker&oe=utf-8&aq=t&rls=org.mozilla:en-US:official&client=firefox-a&um=1&ie=UTF-8&hl=en&tbm=isch&source=og&sa=N&tab=wi&ei=XYC_UPXzH4680QGgxICQDg&biw=1280&bih=863&sei=aoC_UOvtN8bJ0QHlioDwDg https://www.google.com/search?q=fisker&oe=utf-8&aq=t...
    - timdorr 14y ago
      Yep, they're definitely hot cars: http://jalopnik.com/5956179/more-than-a-dozen-fisker-karma-hybrids-caught-fire-and-exploded-in-new-jersey-port-after-sandy http://jalopnik.com/5956179/more-than-a-dozen-fisker-karma-h... </snark>
      - patrickk 14y ago
        Elon Musk doesn't regard Fisker as a serious competitor. He said something like: "Fisker is headed up by a car designer, not an engineer. The reason we haven't had electric cars isn't because they looked bad" (or words to that effect).

j2bax 14y ago

Considering what he's up against in the industry, I'd say what he's done is fairly remarkable. My concern would be that if at any point one of the big three see Tesla as a threat they will put efforts into creating an electric car that undercuts Tesla's offerings and catapults Tesla into a high end niche oblivion. That said, if it comes to that, I will see that as a different means to the same end of reducing our gas guzzling obsession in America, and I can only see that as a positive.

rikf 14y ago
I think you would be surprised I think Tesla's strategy has three stages. 1) Niche high cost vehicle sold in low volumes(Roadster) 2) Medium cost luxury vehicle sold in medium volumes(Model S) 3) Low cost high volume vehicle sold in high volumes. (Model ???) Obviously this is a gross over simplification but I imagine that part of the engineering that is going on at TESLA is figuring out how to build 3 cheaper and at a higher quality then anybody else.
- j2bax 14y ago
  I am aware of their strategy, I just worry that the big automakers with their massive distribution and infrastructures already in place could easily come in and be 10 steps ahead of Tesla and provide a vehicle that isn't as sexy but has the same appeal to the electric car market. I could be overestimating their ability to innovate after so many years of sitting on the same old tired technology, but something tells me that they'd be willing to step up if it means they are going to be completely left in the dust of a tiny (by comparison) company.
  - alxndr 14y ago
    "the big automakers ... could easily come in and be 10 steps ahead of Tesla and provide a vehicle that isn't as sexy but has the same appeal to the electric car market" Aren't they already trying to do that? Chevy's Volt, Nissan's Leaf, Ford apparently makes a fully PEV Focus now, as does Honda with a version of the Fit, and Toyota's gotta be working on the Prius...

brandall10 14y ago

Do you have any idea whatsoever how hard it is to have a successful venture in the automotive industry? You really should watch the Bloomberg Risk Takers documentary on Elon. I'm against handouts as much as anyone (it's a loan though), but try making a comment like this afterward. The difficulties he went thru to keep Tesla afloat were outrageous. By this time he been dumping his fortune into both this and SpaceX and was essentially at the point of personal bankruptcy (ie. was friends/associates time to keep moving, no one was willing to continue investing). Note in the article the sentence "Last month, Mercedes’ parent company Daimler also invested $50 million for a 10 percent stake in Tesla." Do yourself a favor and learn what Tesla actually did to make this happen. Yes, you may have heard they retrofitted Smart Cars with the Tesla power train, but how they did that is a breathtaking example of innovation and teamwork for a company at the brink of death. In short, this loan saved the company. This article we're discussing right now would not exist. Tesla Motors would be another footnote in history that people could point to - "automotive startups are a losing proposition, do not invest". Would you rather the government bet on a guy like Elon who's actually putting his all into carrying out on a promise to change the game, or industry stalwarts who pissed away good will by incompetence and greed?

thematt 14y ago
How about a third option? The government doesn't bet on anybody and let's the market sort out the winners.
- benajnim 14y ago
  While this would be a good option in the spirit of the free market, many parts of the transportation industry are subsidized already making the play-field unfair to begin with.
- king_magic 14y ago
  Does the market always pick the highest quality of winners? I really don't think it does. I'm not saying government does either - TBH I don't really have faith in either the market or the government to accurately pick winners.