

Tesla burns cash, loses more than $4,000 for every car sold - venomsnake
http://www.reuters.com/article/2015/08/09/us-teslamotors-cash-insight-idUSKCN0QE0DC20150809

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MrFoof
_Bugatti burns VWAG 's cash, loses more than $6.27 million on every Veyron
sold._

This is actually true, but guess how many investors in VWAG actually cared?
Not as many as you think. The Veyron was Ferdinand Piech's moonshot. It was
the automotive Concorde. The physics involved are _sort of nuts_ [1],
especially when you consider it was developed in the late 90s and went into
production over a decade ago. The R&D costs were ludicrous. They nearly burnt
down the engine design building because the immense heat the engine spewed out
on the test rig... yet still had to find ways to dissipate that much heat in
actual use. It was considered an engineering and research exercise that could
defray some of its costs.

This isn't much different. New automotive production line and models costing
serious money up front? I'm going to die from a lack of surprise.

[1] _Consider a valve stem cap. They 're aluminum, and weigh ~1g. However at
near 400kph, because of the centripetal force of the wheel, they effectively
weigh 7.5kg at those speeds. They also had to redesign the schrader valves so
they wouldn't deflate at those speeds. They also had to create new TPMS
sensors because even Porsche's -- which were rated for around 350kph -- damn
near disintegrated past 375kph._

~~~
function_seven
7.5kgf centripetal force for a 1g mass just doesn't _seem_ right. The math
checks out though, and tells me that I'm unable to intuit the forces involved
at 250+ Mph.

At that speed, the wheels are spinning at over 4,000 RPM. I wonder what
machine is used to balance those wheels...

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dave1619
The headline is misleading ("loses more than $4000 on every car sold"). Tesla
has a healthy gross margin of over 23% on each car sold (as of last quarter).
They have quarterly losses because of expansion and investments into growth.

If they stopped expansion (stores, service centers, superchargers, equipment,
etc) and investment into growth (new hires, new models, etc), then they could
be profitable since that would lower their expenses and they could use their
gross margin per car to fully cover expenses. However, since they see a huge
market, they are foregoing current profit and investing all of that and more
into expansion and growth. This is only to be expected of a high-growth
company in its early stages of growth.

~~~
rev_bird
It'd probably be more clear to not use car sales as the divisor of an equation
that doesn't involve losses related to actual cars, but if that's the one that
HAS to be used, I think "loses more than $4,000 FOR every car sold" might be a
little more accurate.

~~~
dang
Ok, we s/on/for/'d it.

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reilly3000
I hate this headline. Unless I missed something in the article, $4000/car is
the overall loss divided by the number of cars they produced. The headline
implies a loss a per unit basis, or negative gross profit. The reality is they
have massive capital expenditures that are reasonable to associate with an
expanding manufacturer doing tons of R&D.

------
quonn
I recently got a peak at how the established car makers operate especially
concerning their software development. The amount of engineering that goes
into making things scale across brands, market-segmentation, configurations,
countries and getting the thing produced in high quantities while putting an
incredible amount of engineering resources into literally shaving even a
single euro of costs is insane. Tesla doesn't have to do any of this, yet.

It's like a non-programmer looking at Twitter or even Google. How can this be
hard? Isn't it doing the same job as Spotlight on your local computer? It's
not! It's a much harder problem, primarily because of scaling, fighting with
SEO, etc. We do understand this for software. The car business is more
complicated than it looks.

------
dmfdmf
_" Tesla reports its finances in a different way from the Detroit automakers.
Using the generally accepted accounting principles, or GAAP, used by GM or
Ford, Tesla's operating losses per vehicle have steadily widened to $14,758
from $3,794 in the second quarter of 2014."_

So by GAAP they are losing $14.7K/car. If I had money to speculate with I'd be
shorting them, except this;

 _" Musk has steered Tesla out of tight corners before. In September 2012, the
company faced a cash crunch, but raised money by selling shares and
renegotiating the terms of a federal loan."_

Tells me where the next round of "capital" is coming from when they get into
trouble. Don't let anyone tell you we live under Capitalism.

~~~
ZeroGravitas
One of the companies mentioned in your quotes have been bailed out by the
government to the tune of 80 billion, but Tesla wasn't it.

~~~
curtis
I assume that you are referring to GM. That bailout was by no means cheap, but
it wasn't 80 billion, either. According to Wikipedia:

> In total $51 billion taxpayer money has gone in the GM bailout.[90] Until
> December 10, 2013, the U. S. Treasury recovered $39 billion from selling its
> GM stake. The final cost of the GM bailout cost the U. S. taxpayer $12
> billion ... [1]

I don't believe this affects your argument really, but I think it's important
to try to keep the facts straight, especially about a subject as contentious
(and I'd argue, significant) as the GM bailout.

[1]
[https://en.wikipedia.org/wiki/General_Motors_Chapter_11_reor...](https://en.wikipedia.org/wiki/General_Motors_Chapter_11_reorganization#Bailouts)

~~~
aioprisan
So $12 billion to save 1.2 million jobs and $34.9 billion in annual tax
revenue? Seems like a no brainer. "According to a study by the Center for
Automotive Research the GM bailout saved 1.2 million jobs and preserved $34.9
billion in tax revenue.[91]"
[http://www.usatoday.com/story/money/cars/2013/12/09/governme...](http://www.usatoday.com/story/money/cars/2013/12/09/government-
treasury-gm-general-motors-tarp-bailout-exit-sale/3925515/)

~~~
cma
That assumes the alternative use of the money they were considering was
putting it under a mattress.

------
_ph_
Tesla is currently growing by about 50% year over year. That amount of growth
alone would eat up most profits made on the car sales. On top of that they
have the costs of the imminent launch of the Model X. And, in the next weeks
they are going to open their 500th Supercharger site world-wide. No other car
manufacturer is building up a charger network of that scale. Finally their
Gigafactory is making good progress, supposedly going operational in 2016. So
currently they intentionally burn through their cash reserves to strenghten
their future business.

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mkorfmann
Considering the current drop in value of the TSLA share, would this be a good
opportunity to grab some of them?

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lifeisstillgood
Sounds good to me - at the high end of the car market, adding an extra 4k is
not a big move on the price elasticity curve, but as long as it's profitable
at the margin, then spending 4k of capital to "buy" market share seems
sensible.

I would not rush to sell tesla shares on this headline, and at least they seem
to know where the car market is going.

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brillenfux
TIL Reuters is getting money from the established car industry.

~~~
dang
That sort of accusation isn't allowed without evidence on HN.

