
Tesla’s Burning Through Nearly Half a Million Dollars Every Hour - JumpCrisscross
https://www.bloomberg.com/news/articles/2017-11-21/tesla-is-blowing-through-8-000-every-minute-amid-model-3-woes
======
ricw
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.

~~~
xchaotic
This 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.

~~~
ccorda
Three 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
Producing 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
What issues have been reported so far other than _production_ bottlenecks?

------
IBM
It's surprising how little of a lift TSLA got after Elon pulled out all the
stops to pump the stock ahead of the inevitable secondary sales. It's going to
be increasingly dilutive if investors aren't buying the Elon magic anymore.

~~~
ProAm
Releasing the new Roadster was a mistake I believe, when they are having a
hard time with the Model 3. It's not a sign of strength that the company is
not focusing 100% on the car that is going to (supposedly) make them
profitable.

~~~
alexasmyths
It wasn't really a release, more like an announcement.

He has to keep the Magic going - without the Magic, they would have been dead
long ago. They are dependent on it to sustain crazy valuations.

Maybe saving either the truck or roadster for the next show would have been
keen though :)

I mean, these are cars, not like some little Apple software feature ...

~~~
ProAm
I feel its too diversionary. The Model 3 has immense magic to everyone, car
buyers, investors, futurists, the fate of Tesla itself.... Smoke and mirrors
don't work when you know its smoke and mirrors.

~~~
ModernMech
I think you're right. I don't think anything could be more persuasive then
delivering on the Model 3 promises and bringing in cash. Relying on, as you
say, smoke and mirrors, kind of admits the fact that they're struggling
keeping the promise made with the Model 3, so they're changing the topic to a
new promise.

------
pan69
How does this compare to the amount of money each of Google, Microsoft,
Facebook and Apple burn every hour? Just the salaries alone must be
phenomenal.

What's the news here?

~~~
prklmn
The difference is that the companies you listed have very high free cash flow.
Tesla on the other hand is free cash flow negative.
[https://www.investopedia.com/terms/f/freecashflow.asp](https://www.investopedia.com/terms/f/freecashflow.asp)

------
aerovistae
This is so stupid. Flagged. "Let's take the amount they've spent over the last
quarter and divide by the number of hours to get a click-bait headline. Wow!"

~~~
dragontamer
This isn't the money they "spent" in a quarter.

This is the money they've spent AND the money they've made added together, and
THEN divided by last quarter.

~~~
aerovistae
That really doesn't change anything about this being clickbait nonsense. Their
quarterly losses are already well known. Rephrasing the numbers in a different
context to make them sound more alarming is textbook clickbait.

