
The purpose of Tesla is not to make money - imartin2k
https://techcrunch.com/2017/11/26/in-praise-of-teslas-bankruptcy/
======
DennisP
From a quick look at their balance sheet, in the past year their total assets
have increased from $12 billion to $28 billion, and debt from $2 billion to $9
billion, for an increase in net assets of $9 billion. Cash flow is fine too;
total cash is up almost half a billion over the past year, for a total of
$3.5B.

Looking at their cash flow statement, they are spending a lot but mostly on
capital expenditures.

I don't see any reason to even think about bankruptcy. They're doing fine.

[https://finance.google.com/finance?q=NASDAQ%3ATSLA&fstype=ii...](https://finance.google.com/finance?q=NASDAQ%3ATSLA&fstype=ii&ei=lPMaWoidLYnHmAHr6LuAAQ)

~~~
IBM
What? Did you actually look at their cash flows? They are _massively_ free
cash flow negative, and it's only getting more negative every quarter. The
only reason cash is up is because they regularly tap the capital markets with
debt and equity, which is why Elon is constantly looking for new ways to boost
the stock.

The only way Tesla avoids bankruptcy is if the markets keep believing in the
Elon magic, because the operations are definitely not financing the investment
required.

This is the key thing people miss when people falsely compare Tesla to Amazon.
Amazon has always been free cash flow positive. They may never have turned a
GAAP profit for many years, but they weren't issuing stock to finance their
growth.

~~~
dforrestwilson
^ Why was this down-voted? This analysis is correct.

Tesla is on track to burn >$500m/quarter going forward and will once again
have to access capital markets in 2018. Junk bond markets have been puking for
the past 3 months, so that option probably is getting less likely. That leaves
equity dilution. Not good for current shareholders. [http://archive.fast-
edgar.com//20171103/APA8Q22CZM22D262222M...](http://archive.fast-
edgar.com//20171103/APA8Q22CZM22D262222M2WZ2BOKGZY22H292/)

A lot of the "Assets" noted on the balance sheet are the reservation costs for
all of Tesla and Solar City's promised products. Tesla recently laid off a
significant portion of their workforce at the Model 3 factory. Output was much
lower than they had guided to for the quarter. It doesn't look like that's
going to change soon. If customers start demanding refunds a lot of the assets
listed on the balance sheet go away.

The liabilities on the other hand, won't be going anywhere.

People can insist that Tesla is effecting some positive changes in the world,
but it seems to me that mostly they have been good at repackaging and
reselling the tech of other companies in creative ways.

~~~
smoll
> People can insist that Tesla is effecting some positive changes in the
> world, but it seems to me that mostly they have been good at repackaging and
> reselling the tech of other companies in creative ways.

I've seen this critique leveled at Apple and it makes more sense there (the
Mac borrowing heavily from stuff they witnessed at Xerox PARC and the original
iPhone just doing what a lot of other phones at the time were doing, except
simpler and more mass-adoptable), but what evidence do you have for this
applying to Tesla? Even if you admit that battery technology improvements that
made EVs viable were implemented elsewhere, the entire automotive industry was
100% behind the combustion engine before Tesla, and now almost every car
company is building EVs. This isn't merely Tesla effecting "positive change in
the world", they proved that EVs were manufacturable, that the public wanted
it, and solved numerous obstacles to actually bring it to market. The EV would
literally not exist (to the public) in 2017 if not for Tesla. How is that
merely repackaging tech?

~~~
friendzis
> The EV would literally not exist (to the public) in 2017 if not for Tesla.

According to wikipedia a rather well known EV Nissan Leaf predates Tesla Model
S by 2 years. First hybrid Toyota Prius is 20 years old. Toyota had concepts
of plug-in hybrids for quite some time. Countless local teams make electric
swaps. We had electric golf cars and what not for quite some time.

What Tesla more or less pioneered is premium class performance EV and proved
that there is market in this segment. They proved that not only "convenient
home-work-home trip" (free parking, bus lanes, subsidies) can be market for
EVs.

~~~
ZeroGravitas
Semi-random historical aside, one of the original founders of Tesla (no longer
at the company) makes the claim that Al Gore "invented" the Prius by featuring
the work of some academics on hybrid engines in a televised hearing. Although
ignored by the American companies he was trying to convince, Toyota ran with
the idea.

------
ChuckMcM
I've made money in the past buying out of the money call options on TSLA, I'm
guessing all those short sellers buying butterflies.

That said, the point that sticks out at me in the article is this one -- _"...
because money is how we measure success. And this is in fact true of most
companies. But it is not true of Tesla. 'When a measure becomes a target, it
ceases to be a good measure,' and this is as true of money as it is of any
other measure. The purpose of Tesla is not to make money;"_

There is a tremendous amount of visibility put on the company, and Elon is up
front about what they are trying to achieve. The arguments against them
succeeding boil down to either 'we don't believe you can do what you say you
can do.' or 'we don't understand why you are doing what you're doing, so it
must be wrong.'

It used to really bug me when someone told me that what I was proposing was
impossible. I work to do the necessary research and foundation work to
understand the risks and challenges of a course of action and someone says
"Well, I've never heard of anyone who could do that so you clearly are missing
something." No discussion of the idea, no attempt to understand how I came to
believe what I did.

One of the things I admire in Elon is that he seems really good at just
completely ignoring that noise. It is something I have tried to cultivate as
it is helpful in starting new businesses or projects to be able to not get
bogged down by people who want to tell you why you are wrong and are unwilling
to listen to how you think you may be right.

~~~
mlevental
how do you make money buying call options that are out of the money? do they
go back into the money before expiry?

~~~
ChuckMcM
This is not investment advice! I'm just explaining how it works ...

These days they have gone a bit crazy but it works like this, I would buy Jan
'19 call options that are out of the money[1]. Looking at some that are
'fairly close' (closed at $315, options at $320). They are selling for about
$55 [ibid]. So you buy a contract (100 shares) which costs you $5,500. Now if
TSLA goes up during 2018 people will want to buy those calls from you for more
than $55. Of course if TSLA goes down, or stays down all year then come
January 19 you can either buy your 100 shares for an additional $32,000 (which
you won't since you would lose money on that deal) or let the call expire in
which case the person who sold the option keeps the shares and the $5,500 you
spent.

But here is the fun part, if TSLA goes up 10% (315 -> 346), now your calls are
"in the money by $31", and if you look at calls in 2019 that are in the money
for $30[2] you see they are trading around $69. Which if you sold your
contract for that would get you $6,900 or a gain of 25%.

Compared to the alternative of buying 18 shares at 315 for $5,670, and selling
them when they went up 10% to 346 at $6,228 for a 10% gain.

Buying actual shares is the safer way to go because if you buy a call option
you lose the entire $5,500 if the stock doesn't go up above the strike price!
Buying the call options gives you an opportunity to leverage the volatility
for a higher return.

I've observed there is a lot of 'passion' investing (rather than say
reasonable investing) in TSLA where people buy it regardless and so it defies
gravity and goes up anyway.

[1] [http://www.nasdaq.com/symbol/tsla/option-
chain?dateindex=7&c...](http://www.nasdaq.com/symbol/tsla/option-
chain?dateindex=7&callput=call&money=out)

[2] [http://www.nasdaq.com/symbol/tsla/option-
chain?callput=call&...](http://www.nasdaq.com/symbol/tsla/option-
chain?callput=call&money=in&dateindex=7&page=2)

~~~
Cthulhu_
TL;DR higher risk for a chance at higher return or a 100% loss. Fair enough I
guess.

There's even more passion / panic investing and selling in cryptocurrencies at
the moment. I think both Tesla and crypto are areas where a lot of people
think they know a lot about, or are passionate about, and they go for that.

------
danso
> _Maybe; maybe not. Either way, a far more interesting question, if (like me)
> you have no financial interest in the business’s success or failure, is:
> does it matter?_

If you're an American, it does matter in the sense that the subsidies that
allow Tesla to keep moonshotting with relative comfort are paid through your
tax dollars [0]. Tax dollars that could either go back to your pocket, or
otherwise indirectly benefit you by subsidizing a more effective venture.
Hell, some of those tax dollars could even be used to help the original
moonshot institution.

I think what Tesla and Musk are doing is very cool. But let's face it, lots of
companies and individuals could promise cool things if they had a multi-
billion cushion. I think the OP makes some decent points about how silly it is
to care about immediate or substantial profit margins -- hell, any investor in
Amazon would agree with that.

But it seems dangerously naive to just think this:

> _But it is not true of Tesla. “When a measure becomes a target, it ceases to
> be a good measure,” and this is as true of money as it is of any other
> measure. The purpose of Tesla is not to make money; it is to pioneer fleets
> of smart mass-market electric cars, and the infrastructure to support them,
> and battery technology which is not limited to cars. Making money is
> ancillary._

That is the _claimed_ purpose of Tesla. The author is confusing Tesla's self-
interested claims with reality -- this is basically Kool-Aid-drinking-cultism.
And giving Tesla and Musk the complete benefit of the doubt in terms of
altruism, that doesn't mean that their positive dreaming has an infinite
buffer against shitty implementation and business practices. Profit is
definitely not everything, but it's a potentially very useful signal (among
others) to weed out non-performance and incompetence.

[0] [http://www.latimes.com/business/la-fi-hy-musk-
subsidies-2015...](http://www.latimes.com/business/la-fi-hy-musk-
subsidies-20150531-story.html)

~~~
mjamesaustin
Tesla's primary method of financing is through debt and equity, not through
any government subsidy.

Yes they get ZEV credits, but the revenue from those pales in comparison to
their sales, loans, and stock offerings.

Not to mention that most of the traditional car manufacturers in America
received huge government bailouts to stay afloat in 2008, so even if you
slight Tesla for receiving a loan (which they repaid early with interest) they
are still on equal footing with other manufacturers.

~~~
jjeaff
I think it would be rather large if you count the electric subsidies that
states and feds pay for Tesla cars and solar panels.

Tesla themselves generally provides their price comparison or total cost of
ownership figures including the government subsidies.

~~~
mdorazio
Was going to say exactly this. Without the $7500 tax credit, the Model 3
immediately shoots out of reach for a large number of people who want to buy
one. Same for solar roofs - without the tax credits, it takes way longer to
pay for panels than most people are willing to wait. All the Elon companies
depend heavily on government subsidies, whether corporate or consumer, for
their success.

------
chki
>After all, even if Tesla stock goes to zero, and its bonds default to
pennies-on-the-dollar, its factories and software repositories and human
capital will all be there, and no Chapter 11 court or committee will be blind
to the fact that they’re worth far more as a coherent unit than they would be
as separate assets.

Well, to me that statement seems to be at least dubious. If the company is
loosing money and goes bankrupt it is obviously not worth something in its
entirety - at least in its current form. (And I highly doubt that simply
restructuring Tesla would do something about that.)

This does however not neglect the premise of the article. Even if Tesla would
no longer exist in any form, there has been some creation of value for society
as a whole.

~~~
thewhitetulip
It has already done it's job. "EV were impossible to build." just a few years
ago when the Israeli PM met with top five auto manufacturers.

Then came Tesla and now the fastest car is Tesla Roadster.

~~~
Cthulhu_
Not yet, it's not been released yet and I'm fairly sure there's not been
independent tests yet.

------
vasco
Tesla looks like Elon's attempt at running a high-stakes Amazon-for-batteries
type business where they invest all they get into the business and get massive
adoption in the long run. Except for a much much more capital intensive
industry, and where so far more than a couple of things have gone wrong.

At the moment they're in a very tough spot where they've issued bonds, folded
Solar City into Tesla in a weird attempt at bad accounting and pretended like
(already 3) new product lines were ready to take in pre-order money. Meanwhile
they're using excess battery production capacity not being used for cars
(which are stuck in slow production lines) for a quick (small) buck in
Australia and Puerto Rico.

I think we're going to see either a secondary offer or new bonds being issued
soon.

~~~
whamlastxmas
I mean this as nicely as possible: armchair speculation like this doesn't make
sense to me. You're insinuating you'd be a better decision maker than an
entire team of lawyers, executives, and accountants at a fairly prestigious
place to work. Describing things as "bad accounting" or suggesting they're
trying to make a "quick buck" just makes it seem like you lack the awareness
to realize that you probably don't have all the information and haven't spent
the same amount of time and effort in decision making as the executives at
Tesla. You're not some lost genius in a world full of idiots. People are
generally rationale actors, and the people working at Tesla seem pretty smart
to me.

~~~
computerex
Your entire argument hinges on:

> People are generally rationale actors

This is the internet, and people are allowed to speculate. "I am sure they
know what they are doing, they are really smart people" is not an argument.

~~~
abalashov
Yeah, but "You're not some lost genius in a world full of idiots" _is_ an
argument.

It's actually a rather punchy restatement of the Efficient Market Hypothesis.
:-)

~~~
lovemenot
>> restatement of the Efficient Market Hypothesis

Actually not. The _smart_ people described are all executives (experts) at
Tesla. Their interests are therefore aligned, not individuals acting in their
own self-interest in the marketplace.

------
xrayarx
We should not forget, that bad press about tesla is in the interest of Jim
Chanos, who is a billionaire and has a big short against tesla. If Tesla stock
falls, he wins. Since he holds this short position, he is in the press once a
month.

~~~
aaavl2821
On the other hand, good press about tesla is in the interest of Elon musk and
tesla shareholders. Wars between bulls and bears on controversial stocks are
waged largely in the press

------
jaimex2
I don't think Tesla or Elon have ever said their goal was to make money. Their
mission statement has always been "To accelerate the adoption of sustainable
transportation."

"Whenever you have an unpriced externality you can't quite rely on the market
to do the right thing. So in order to have electric vehicles come sooner than
they otherwise would... electric vehicles were always going to be the long-
term transportation mechanism, but to make that day come sooner, you have to
bridge the gap with innovation. That was the goal with Tesla is to try to
serve as a catalyst to accelerate the day, the day of electric vehicles. And I
think when all is said and done, I am hopeful that historians will look back
on Tesla and say that Tesla advanced that by at least 10 years, which that
would be a huge victory of mine... in my mind."

\-
[https://www.youtube.com/watch?v=jpcJ3jX-2DA](https://www.youtube.com/watch?v=jpcJ3jX-2DA)

It's the same with SpaceX, even though its been profitable I don't think they
have ever celebrated that. They keep aiming to burn money towards getting to
Mars which itself is another money pit.

I think Elon is genuine, he's actions do follow his words. He doesn't care
about money, he cares about advancing humanity for the thrills and
exploration.

------
volgo
I don't believe in Tesla's long term business, but you have to be either a
naive fool or insanely rich to short Tesla.

As Warren Buffett once said, the market can be delusional a lot longer than
you can be liquid. You can be right and still lose a ton of money

------
tim333
>Jim Chanos summarized all of the reasons why nicely: “If you wouldn’t be
short a multi-billion-dollar loss-making enterprise in a cyclical business,
with a leveraged balance sheet, questionable accounting, every executive
leaving, run by a CEO with a questionable relationship with the truth, what
would you be short? It sort of ticks all the boxes.”

A major box it doesn't tick from a short sellers perspective is the "make
something people want" thing. Loads of people want it's cars and would be
trucks. The main question is can they deliver them but I'd be wary being short
in case they can.

~~~
bob_theslob646
The issue is time frame. Chanos smells blood in the water for the upcoming
quarter(s).

The question he is going to have to face is whether he can stay solvent longer
than Tsla stock price is irrational.

My bet is he stays in 2-3 quarters until he makes his kill and then exits.

------
sharpercoder
One substantial possible factor in Tesla's bankruptcy is competition. You
suddenly now deal with car manufacturers which are woken up to the electric
drive age.

Thought exercise: how can competition take serious levels while Tesla produces
half or more of the world's battery capacity?

~~~
will_hughes
> You suddenly now deal with car manufacturers which are woken up to the
> electric drive age.

This keeps getting repeated, but all I see are some meagre efforts which seem
primarily focussed on headlines rather than actually delivering mass-scale
EVs. Concepts. Demonstrators. The closest any of them have come is the Bolt
(which is limited in availability, and their dealer networks regularly push
people away from buying), and the Leaf (which until the most recent model
still looked far too much like a golf buggy and had very limited range).

These are large companies with massive departments used to pushing out new
vehicle models every year and updating production lines to suit.

I'm still yet to hear of any of the major manufacturers sign contracts for
large scale battery deliveries to support any mass EV production.

I don't understand why their outlook is always 2019-2020-2025-2030 for their
full EV range unless they're just hoping for Tesla to fail and finally be able
to point out and say "See, EV doesn't work!" so they can go back to what
they've been doing for a long while.

~~~
sharpercoder
Exactly my point. They can design an electric car just fine, they can produce
an electric car sans battery just fine, they can sell them just fine.

They can't setup scale-up battery production sites within years. That's why
serious competition from traditional car manufacturers won't happen anytime
before 2022.

Chinese producers are a different story. They have the government behind them
for resourcing (Lithium and Cobalt). I see Chinese manufacturers as the most
serious possible competition. However, it's not unlikely the government will
not allow exporting of electric vehicles on a mass scale since they will want
to use them theirselves.

------
mankash666
I'm a pragmatist - Tesla has had years to prove it could eke out a profit.
Everytime it hasn't met this expectation, Elon Musk has managed to change the
conversation to something forward looking, pie in the sky BS. And
surprisingly, investors bet on short term stock inflation based on these
fables, probably fully knowing they aren't achieveable.

At this point they're betting on stock movements triggered by Musk, not
company fundamentals. It's Vegas glorified

~~~
greglindahl
I'm always surprised by the number of people on Hacker News who want to
complain that Tesla is acting like a startup trying to "go big or go home".

------
yters
Not a fan of giving sci-fi idealism a blank check. Moonshot is ok, that's how
we got ICBMs and spy satellites, arguably necessary to keep a check on our
enemies, though that is arguable these days. Roads and the Internet made even
more sense. But, funding a for profit company with billions of tax money for
sci-fi promises with unproven premises seems much more questionable.

~~~
fragmede
The company's finances may be shaky, but electric cars aren't a "sci-fi
promise with (an) unproven premise". The original Tesla Roadster came out in
2009 (or so), so there are 8-year old electric cars by Tesla driving around
out there.

~~~
yters
To throw so much money at the enterprise hinges on the assumption that
electric cars can be a significant replacement for fossil fueled cars, and
displace the electricity production (and other manufacturing costs) in such a
way to be much more environmentally and economically viable. Just because we
have a few (proportionally) working electric cars does not mean this vision is
plausible. The original automobile did not need this kind of extrapolated
justification, it was immediately obvious the car was much better than the
wagon, and combined with the assembly line established a clear and very large
market. I do not see this happening with the electric car.

------
pocketsquare2
The title now is "In praise of Tesla’s bankruptcy."

Did Tesla file for bankruptcy? I'm confused. Nikolai Tesla filed for
bankruptcy in 1916.

This is phenomenally irresponsible of TechCrunch generally, and Jon Evans
specifically.

~~~
salvar
If you read the article, or even just the beginning of it, instead of just
relying on the headline then I think you'll be less confused.

~~~
nickik
Missing the point.

~~~
salvar
I got the point, just wanted to help since you said you were confused.

------
agumonkey
Anybody listened to one recent conf call with Musk ? it was on youtube.

He seems to be in some good sht (subpar assembly line for the batteries and/or
engine having to be reassembled from scratch which is done according to him)
so so far this particular problem is not out of control for Tesla, but then
time is critical too, competition is ramping up, and laws are shifting (EV tax
cut is gone now I believe).

I like Musk approach of going legacy free to stretch the limits of the current
model, as he did for SpaceX. I'd be sad if Tesla choked enough to crash. If he
just made it to the model 3 production that would be "cool".

I don't know how people in the know understand the recent Semi/Roadster
unveiling, is it distraction to get some buzz or a final scheme to finance the
model3 step with easier things to be done in 2020 (smaller market for Semi and
I believe a litle less complex to build than a cramped 4 seater)

~~~
rockinghigh
EV tax cuts are not gone. Some versions of the tax bill proposed to remove the
federal tax credits. Also Tesla will reach the 200,000 threshold of cars sold
where the credit starts to phase out. But there are still state incentives.

~~~
agumonkey
Ha, I forgot the 200K figure, but I believe there was a year limit too.
Otherwise the blame is on Musk u_u

------
hkmurakami
A mission (or outcome) driven company can only continue its mission if it can
be financially viable.

A non financially viable incarnation of a mission driven business will not be
able to further its cause compared to its longer lived version. At some point
a reckoning will come and take away the path to your objective.

See the recent news about Etsy listing its way.

------
Apocryphon
What if, Tesla is simply a Silicon Valley startup, and the endgame is to get
one of the Big Three to acquire them so they don't have to worry about their
day-to-day finances?

~~~
SimbaOnSteroids
They've already IPO'd.

~~~
stevenj
It can still be acquired and/or taken private.

------
mbesto
> Either way, a far more interesting question, if (like me) you have no
> financial interest in the business’s success or failure, is: does it matter?

I guess the author has glanced over the billions of subsidies that come from
taxpayers? [0] So ya, I think American taxpayers should care about Tesla's
bankruptcy.

PS - The author of this article is the CTO of a company who's customer is,
yup, you guessed it, Tesla. [1]

TC at it's finest folks.

[0] - [http://www.latimes.com/business/la-fi-hy-musk-
subsidies-2015...](http://www.latimes.com/business/la-fi-hy-musk-
subsidies-20150531-story.html)

[1] - [https://happyfuncorp.com/case_studies/hfc-labs-making-
tesla-...](https://happyfuncorp.com/case_studies/hfc-labs-making-tesla-
ownership-social)

~~~
nkoren
I call bullshit on [0]. The government is buying goods and services from
SpaceX. That's not subsidizing -- that's being a customer. It's _particularly_
not subsidizing when the alternative suppliers of said goods and services are
3-7 times the price.

~~~
mbesto
Ok, here ya go:

[https://seekingalpha.com/article/4079749-nevada-
demonstrates...](https://seekingalpha.com/article/4079749-nevada-demonstrates-
tesla-depends-heavily-taxpayer-subsidies)

~~~
nkoren
Is goalpost-moving some kind of sport these days?

~~~
chiaro
It's very clear that Tesla benefits from excessive subsidies. They even had
states compete on how many tax cuts and other benefits they could provide:

[https://en.wikipedia.org/wiki/Gigafactory_1#State_competitio...](https://en.wikipedia.org/wiki/Gigafactory_1#State_competition_and_incentives)

By even bringing up SpaceX you're trying to narrow the goalposts to something
no one else is talking about.

~~~
azemetre
Is there a single US corporation that doesn't rely on government handouts?
Complaining only about Tesla seems disingenuous when you have massive handouts
given to oil and gas companies, not too mention how many cities are offering
Amazon what is equivalent to free reign if they get HQ2.

You can complain about corporate welfare but only complaining about one
corporation isn't really fair. Walmart utilizes local police forces to skimp
on internal security (not too mention using welfare to subsidize poor pay),
Military companies relying on politicians literally stuffing their coffers
while the Pentagon argues otherwise, resource extraction companies are given
free permits to bleed the land dry, agricultural subsidies, 0% interest loans
dictated through the Fed, the auto bailouts, the financial bailouts, propping
up home prices through artificial means. The pattern seems to be taking tax
dollars and giving them to corporations.

~~~
chiaro
The vast majority of US corporations are far too small to get tailored breaks
and incentives. TARP/lending of last result is another thing entirely.

------
acjohnson55
Check out the book Doing Capitalism In The Innovation Economy for a defense of
the government encouraging exactly this sort of thing. I reviewed it on Amazon
here:
[https://www.amazon.com/review/R2SCHS5SXNDF30](https://www.amazon.com/review/R2SCHS5SXNDF30).

Point being, we want exactly this sort of thing, but it's foolish to expect
the market to make this sort of investment very often.

------
lmilcin
People are blinded by so called conventional wisdom which is what business
people built when working with conventional businesses to make it easier for
them to understand what is going on, in most cases.

Tesla is not a conventional business. It is more of an edge case where you
have to put your thinking hat to make sense of it.

~~~
cbanek
> People are blinded by so called conventional wisdom

This seems to be the exact kind of thinking that led to the dotcom bust.

I've commented before on the whole Tesla valuation thing, and people try to
think of it like a tech company, and want to value it like a tech company.
Tesla needs to actually produce things in a factory, deal with regulations and
supply chain, which are very conventional business problems, and where the
trouble is.

~~~
lmilcin
Tesla is not a production company yet. Tesla is a promise of what it can be.
The promise is that it can be one of the biggest, greatest and most important
companies in the world, sometimes in the future. The current job of Tesla is
not to start producing tons of cash, it is to maintain the faith that the
promise will be fulfilled.

The faith is maintained in few ways:

\- by constantly kicking ass technologically -- improving the products way
outside of what competitors believed was even possible,

\- by iterating crazy fast on their ideas -- something that conventional car
companies will not be able to do. They won't be able to do because they would
have to replace most of their management with people that are suited to this
pace of change. Conventional car companies may flex muscles, but all their
money will not be enough because the biggest problem doesn't lie in having the
funds but in people. Funds are easy once you show you can do it, but getting
the right people is much more difficult once you have large and established
business.

\- by showing they can maintain exponential growth until they are dominant
force in the market.

~~~
semi-extrinsic
> improving the products way outside of what competitors believed was even
> possible

None of their competitors have said anything Tesla has done is impossible,
merely that it's been (and remains) unprofitable without crazy VC funding that
Tesla is tapping into.

> by iterating crazy fast on their ideas -- something that conventional car
> companies will not be able to do

On the flipside - did you ever hear of conventional car companies with the
kind of problems Tesla has, where they've overpromised/underdelivered on
production rates by 20x - 30x? And they're stuck on elementary things like
they don't know how to automate welding metal bits together?

> by showing they can maintain exponential growth until they are dominant
> force in the market

Can you show me the numbers supporting that claim? Tesla growth e.g. in number
of vehicles sold from 2010 to 2016 isn't very different from the total
automobile market in the US, which also grew almost 2x in the same period. If
you look at it quarter by quarter, it's obviously linear growth for each of
their models (Model S, Model X). And their total numbers for cars sold,
revenue, income etc. remains at the sub-one-percent level as compared to GM,
Ford etc.

~~~
ricardobeat
> did you ever hear of conventional car companies with the kind of problems
> Tesla has, where they've overpromised/underdelivered on production rates by
> 20x - 30x

Yes: [https://truckyeah.jalopnik.com/why-wont-gm-deliver-its-
huge-...](https://truckyeah.jalopnik.com/why-wont-gm-deliver-its-huge-backlog-
of-diesel-chevy-co-1748533129)

It is incredibly common for cars to have 3-4 month back orders. The Model 3
production is actually in-line with the original 'late 2017' start of
deliveries, the goalpost was pushed closer later.

------
skybrian
It helps that Tesla isn't in the S&P 500 yet. But I wonder what other indexes
they're in?

------
spo81rty
I love Tesla cars. There is no way I would own the stock.

Tesla would be better off if they designed cars and let someone else
manufacturer them.

~~~
whamlastxmas
Have you really looked into this? How much would it cost Tesla in the long
term to let someone else manufacture their cars? How would this impact their
long term profitability? Would their competitors even be willing to do this?
What kind of terms could they manage to negotiate? How much of a risk is it to
let someone else have a stranglehold on your manufacturing?

I don't understand sweeping opinions like this when you have no idea what
you're talking about.

~~~
ridgeguy
I think it's an interesting idea. I wouldn't summarily dismiss it.

Your questions about it are interesting, unanswered, and not fatal to the
idea.

After all, don't Foxconn, et al., have a stranglehold on the manufacture of
Apple's iPhones? That seems to be working out ok for all parties.

------
vadimberman
I am not entirely sure why Musk has to be the CEO there. He is a tech whiz and
has his hands full, why not appoint a COO material instead to fix the P&L?

------
blake8086
From what I've seen, the point of Tesla is to burn money as fast as possible.
I have two episodes of a podcast with a friend about exactly this topic:

First episode:
[https://www.youtube.com/watch?v=6bQW1fEUsbk](https://www.youtube.com/watch?v=6bQW1fEUsbk)

Most recent episode:
[https://www.youtube.com/watch?v=VXyIriINVK0](https://www.youtube.com/watch?v=VXyIriINVK0)

I highly recommend them if you're interested in investing in Tesla (long or
short)

~~~
dmfdmf
I enjoyed your podcast and I agree, it looks dire for Tesla.

------
zerostar07
... or cars

------
cryptoz
> Tesla is losing a massive amount of money

This just simply isn't true. Losing the money means they spent it and got
nothing for it. But every penny they spend, they get a lot of things - battery
technology, market share, mindshare, network effect lockins (superchargers),
etc. Tesla isn't losing its money, its investing it.

Also,

> The purpose of Tesla is not to make money; it is to pioneer fleets of smart
> mass-market electric cars, and the infrastructure to support them, and
> battery technology which is not limited to cars. Making money is ancillary.

This is also false. It buys into Elon's marketing and it's false. The purpose
of Tesla is to make money. Elon likes to say that it's not the money he is
after, it's the faster pace of adoption for electric cars. But he also knows
that the fastest way for this to happen is for Tesla to make money. The author
is false. The purpose of Tesla is indeed to make money.

~~~
dragontamer
> This just simply isn't true. Losing the money means they spent it and got
> nothing for it. But every penny they spend, they get a lot of things -
> battery technology, market share, mindshare, network effect lockins
> (superchargers), etc. Tesla isn't losing its money, its investing it.

Yes, and such things are reflected in their balance sheet under "Assets" and
"Goodwill". The problem with Tesla is that after accounting for their "Assets"
and "Goodwill", they're still negative.

Tesla says its "Goodwill" is worth $461,989,000 in 2016 for example. See its
2017 10k if you don't believe me (its in "thousands", so search for 461,989).
[http://ir.tesla.com/secfiling.cfm?filingID=1564590-17-3118&C...](http://ir.tesla.com/secfiling.cfm?filingID=1564590-17-3118&CIK=1318605)

The rest of Tesla's assets, which include every factory, every bit of cash,
every investment... was estimated to be $ 692,925,000.

That is, Tesla believes itself to be a $1 Billion company, but roughly half of
its valuation is "Goodwill" and brand recognition.

Believe it or not, Wall Street has names for the things you've described. Its
all part of the calculation.

\----------

Anyway, after accounting for all of that, Tesla is still losing money, quarter
after quarter, year after year.

~~~
Meegul
Unfortunately I believe the numbers you're citing are actually in relation to
their Solar City acquisition. The roughly $1B figure you're citing is the
valuation of Solar City, not Tesla.

------
irhd
> The purpose of Tesla is not to make money

Yes it is. It is a publicly traded company. if that's not Musk's purpose then
he should (rightfully) be forced out and replaced with someone who has the
right view.

Then he should pay his PR people a massive bonus.

------
lafar6502
It’s not about money, it’s about wasteful and parasitic businesses financed
unknowingly by society

------
paulpauper
Does techcrunch not realize the gravity of publishing an article with such a
false and misleading headline pertaining to solvency of a company? They could
get sued..imagine such an article were released during market hours. Many
traders and bots make decisions on headlines.

~~~
mantas
> Many traders and bots make decisions on headlines

Is it that easy to troll supposedly smart people and AI?

~~~
tim333
Sometimes the traders trading on headlines are smart and are counting on less
smart people to act on the headline a bit later. By the way I don't think that
techcrunch article will effect anything much. It's a bit dumb - a bankrupt
Tesla wouldn't leave functional assets in the same way that the channel tunnel
did for example.

------
scotty79
The idea that stocks exist for some investors to get rich is utterly silly.

Stocks exist to trick investors into funding someone elses ideas that they
wouldn't fund otherwise by selling them casino chips that they can use to
gamble among themselves.

The only reason the company should be concerned about their share price would
be that they want to issue more and they'd like to get as much money for them
as possible.

The law that makes boards care about value for investors is the most ignorant
thing ever written.

------
jondubois
I never thought I'd read a TechCrunch article which puts into question the
integrity of the entire capitalist system...

This is very different from the typical capitalist rhetoric that if you're
smart and work hard in ways that benefit society, you'll be personally
rewarded. Now it seems that the conditions for success are extremely
ambiguous.

Bankruptcy is essentially a hack on the system and to now pretend that it's a
normal part of an efficient capitalist society is quite outrageous.

If it were real capitalism, there would be no bankruptcy, you'd have to work
to pay back every penny for the rest of your life. I'd prefer that. Because
otherwise you're just encouraging people to take risks using other people's
money.

~~~
aaavl2821
Investing in ambitious companies that could lose everything or make a fortune
is the name of the (venture) capitalist game

Also, bankruptcy is not a "hack", it is a legal process to protect creditors /
vendors / employees as well as companies. while there is a widespread belief,
encouraged by politicians post financial crisis, that companies use bankruptcy
as a way to protect themselves from risk, that is incorrect. Bankruptcy is a
legal process for dividing up a failed companies assets so that it is not a
free for all. It protects employees by preventing powerful creditors from
forcefully claiming value until other constituents get paid in accordance with
the legal statues of the process

~~~
jondubois
VCs are a flaw in the system.

It costs almost $0 for an engineer to build software and yet VCs have somehow
managed to artificially raise the barrier to entry and got huge paychecks for
themselves in the process.

If VCs did not exist, I'm certain that we would have all the software,
websites and apps that we have today except that it would have cost society
much less to get to that point... Also maybe these apps and websites wouldn't
be the terrible morally bankrupt profit machines they are today.

~~~
aaavl2821
"If VCs did not exist, I'm certain that we would have all the software,
websites and apps that we have today except that it would have cost society
much less to get to that point... Also maybe these apps and websites wouldn't
be as terrible for society as they are today."

That is quite a bold opinion, presented without any evidence at all. And my
opinion is that is the opposite of true. For what you said to be true, not
only would server / hosting / infrastructure costs need to be zero, but
hundreds of thousands of people would have to decide to work 60 hours a week
for free

It does not cost an engineer $0 to build software. Tell an engineer you think
his / her time is worth zero and see what response you get

~~~
jondubois
There are plenty of bootstrapped companies which managed to pay the hosting
costs just fine. In fact it's better because it forces companies to prove
their model while they're still small before they become a huge systemic risk
to all of society.

~~~
aaavl2821
Plenty of bootstrapped companies != all the software and apps we have today

~~~
jondubois
Yeah because VC money drove up the price of online advertising to insane
levels which bootstrapped companies could no longer compete with and then they
hoarded up all the blogs with constant streams of articles... There was a long
period when VCs essentially owned all the popular tech blogs. Bloggers would
not dare to cover any product which was not backed by VC money for fear that
it would ruin their future prospects.

In effect, VCs used their money to gain a monopoly on user attention and this
killed off a LOT of bootstrapped companies which would otherwise have strived.

