
Tesla is heading for a cash crunch - edward
https://www.economist.com/news/business/21739981-road-ahead-elon-musks-car-company-looking-more-perilous-tesla-heading-cash
======
takeda
I feel like the author missed the dip caused by the April Fools joke, and
tries to create another one.

I think what's Elon is trying with the automation is very similar to
difficulties that SpaceX had initially with reusable rockets. At first people
doubted SpaceX can replace NASA, then that it was possible to do have rockets
to return back, later when it started looking reasonable but SpaceX rockets
were still crashing, company like Blue Origin were making fun of them by
posting video that they can already land (omitting that just getting 100km up
and back was far less challenging than what SpaceX was trying to do).

Eventually SpaceX succeeded and this resulted with much cheaper cost to send
satellites to space.

To me it looks like Tesla is going through same thing, they try to automate
all manufacturing instead of doing what everyone else is doing, this might
make things bad at first, but once they succeed it will be very easy to scale
the production and the only limitation will be the supply.

I believe in Tesla primarily because of Elon, he is kind of a guy who doesn't
have word "failure" in his dictionary, if Tesla doesn't succeed then most
likely what they were trying to accomplish was impossible.

~~~
sunstone
Elon is a fundamentals kind of guy and that drives his strategy. The
fundamentals with respect to electric cars from the time he started were:
a)electric is a _much_ better technology than ICE for automobiles. Electric is
way simpler, lower center of gravity means better handling, smaller and
lighter motors mean more interior space and better performance. Battery tech
is a pain point but no CO2 is essential for everyone.

b)Large automakers know this but simpler for them translates into less
maintenance which means lower profits. Automakers therefore will pay lip
service to electrics, drag their feet and kill off any real electric
competition if they can. The world's environment is not a shareholder in the
large automakers.

So his "master plan", (the Truth but not the whole truth) he published in
2006. What he left out was that he knew as he moved to a high volume model
that's when the large automakers would try to cut Tesla off at the knees and
then go back to resting on their laurels.

If his high volume model was mediocre and expensive to build Tesla would be
dead in the water. He needed an excellent car but even more than that he
needed Tesla's cost to be much lower than the majors could match so they
couldn't low ball the market long enough to cut off Tesla's oxygen.

When Tesla got 400k Model3 pre-orders that's when he decided to double down on
the 'low unit cost/large production investment' strategy for the model3.
Making this work is _critical_ to Tesla's strategy. You can be sure Musk and
his team put a lot of effort into the production tech knowing it was make or
break for Tesla.

The Economist is under estimating Musk and they should give him a little more
credit given his track record. Telsa is not a slam dunk but it's also nowhere
near as fragile as they make out. Musk also has a bit of equity in SpaceX he
could lean on if the markets demur at the end of 2019.

~~~
dragontamer
> The Economist is under estimating Musk and they should give him a little
> more credit given his track record. Telsa is not a slam dunk but it's also
> nowhere near as fragile as they make out. Musk also has a bit of equity in
> SpaceX he could lean on if the markets demur at the end of 2019.

[https://static.seekingalpha.com/uploads/2018/3/1/37229846-15...](https://static.seekingalpha.com/uploads/2018/3/1/37229846-1519910035030181_origin.png)

Tesla is going to run into issues in 2019 if they are unable to ramp up the
Model 3. Tesla lost $1.6 Billion last year, and they only have $3 millionish
in cash. Furthermore, Tesla has debt that is due in 2018 (~$300 million or so)
and early 2019 (~$900 million).

Over the next year, Tesla needs to pay off $1.2 Billion in debt, AND needs to
increase revenue by ~$1.6 Billion or so to stay even. They're not exactly in a
good situation.

I'm relatively confident that Mr. Musk can raise another $3 billion in capital
through stock offerings or rolling over their debt in the short term, but
those options have some risks involved. Furthermore, people will not want to
lend money to Tesla if they think that the company is sinking.

\-----------

All the while, Tesla has bought SolarCity and also inherited all of its debt
and issues. Tesla was having enough issues ramping up Model 3, but now they
ALSO have to make the solar company profitable too. It was a bad time to buy
SolarCity.

------
slivym
I understand people WANT to defend Tesla here, but there are some really
rubbish arguments people are trying to push and especially some that border on
conspiracy theories.

Tesla has real problems: The first is that it's failing to meet production
targets. There's no way around this, the company is on rocky times and while
I'm sure that given unlimited time and resources they could get to the
production targets we don't live in a world with infinite time and money.
Other players in this market are moving quickly, if you want to see a
compelling example of electric technology the Hybrids from Toyota are great,
and they're producing 10 million cars a year. So it's not a sure thing that
Tesla ever becomes a leading car manufacturer (and therefore pays off its debt
and shareholders).

Even then, there are serious questions about the full automation of their
production line - what is that point of a robot doing everything if you're
paying more to run the robot than a human would cost to do the same thing?
Industry analysts aren't idiots, and neither are the other car manufacturers.
Even if the Tesla factory goes fully automatic years before other car
companies you might find it's actually not economically beneficial. So all
these problems they've imposed on themselves may not even provide benefits.

The second is that their self-driving program is hitting similar bumps to the
automation. They've rolled out something early and they've opened themselves
up to huge liabilities. There's good reason other car manufacturers are being
very careful with the roll out- liability from accidents could bankrupt your
company.

The final thing is that Tesla's accounts as a standalone company don't look
stellar. They have a lot of short term debt and they need to roll that over at
a time where they're missing targets and killing customers. That's a huge
economic problem. The result will be either they fix problems 1 & 2 or Musk
will have to issue stock at the risk of losing some control, or pump more of
his own money in.

One final point I'd like to make about this: Elon Musk wanted Tesla to move
everyone to electric cars. For him, Toyota or Ford selling electric cars would
be a victory. For Tesla and it's shareholders that's not true. So whilst Musk
may succeed, it's not necessarily going to happen through Tesla. He's done a
great job of scaring other companies into Electric and autonomous vehicles.
That does not mean Tesla will ever pay off to shareholders.

~~~
mschuster91
> Other players in this market are moving quickly, if you want to see a
> compelling example of electric technology the Hybrids from Toyota are great,
> and they're producing 10 million cars a year.

Toyota is mass-market. It's not hip. Everyone can drive a Toyota - a Tesla,
though, is a status symbol. The competition in the "status symbol" range is
BMW (the 7er series) - which is primarily an ICE-vehicle based company. Yes,
they have the i3 and the i8 experience but that's low volume - when they try
to scale up, also BMW will face issues AND they will have to either convert
entire assembly lines or retrofit, both of which is expensive - compared to
Tesla which HAS an assembly line, and only has to figure out how to make it
work at scale. The question is, who will be faster to solve their issues - BMW
or Tesla?

~~~
stephengillie
Wasn't the business goal for Tesla to become mass market? Toyota and BMW have
their relative status symbols sold and resold by numerous dealers worldwide.
And their status symbols have very regular body panel seams - the very
definition of quality. These 2 companies have vast experience bringing a new
car model or drivetrain component to scale, along with more factories to test
with. Not to mention they could form a business partnership with each other,
just like Toyota and GM did at NUMMI[0].

[0]
[https://en.m.wikipedia.org/wiki/NUMMI](https://en.m.wikipedia.org/wiki/NUMMI)

------
gizmonty
Isn't this last week's problem? I thought Tesla was fine this week.

~~~
sabertoothed
I like your humour.

TSLA stock fluctuations really keep me on my toes. -10% on one day, +10% on
the other. It is an emotionally charged stock.

~~~
jijojv
you mean like Autopilot [https://www.cnbc.com/2018/01/31/apples-steve-wozniak-
doesnt-...](https://www.cnbc.com/2018/01/31/apples-steve-wozniak-doesnt-
believe-anything-elon-musk-or-tesla-say.html)

"Man you have got to be ready — it makes mistakes, it loses track of the lane
lines. You have to be on your toes all the time," says Wozniak.

~~~
danso
I don’t think Woz should be seen as a particularly relecant commentator on
Tesla (Tim Cook, despite not being an Apple co-founder, would be far more
interesting). But as usual, I find myself nodding in agreement with Woz’s
worldview.

~~~
jacobush
... why not relevant commentator? He's got the geek cred.

~~~
danso
Not necessarily about cred, but because he's not in an industry position or
otherwise has the insight that Apple "co-founder" suggests. Don't get me
wrong, I think he's was as vital to Apple as Steve Jobs was in its pre-iPod
era.

------
thisisit
Most of the Tesla threads seem to directly jump from Tesla to Musk to SpaceX.
The question on viability and profitability are never answered during such
comparisons. I dug around to see how SpaceX was doing and I only found this
article from early last year:

[https://www.nasdaq.com/article/will-spacex-earn-a-profit-
in-...](https://www.nasdaq.com/article/will-spacex-earn-a-profit-
in-2017-cm875897)

> Moreover, if SpaceX achieves its stated goal of sending 20 rockets into
> orbit by the end of the year, the $1.44 billion in revenues that implies
> suggests rising levels of profitability. And if SpaceX achieves its targeted
> 30 launches in 2018, the company should be even more profitable next year.

When I look up the launches from SpaceX's site:

[http://www.spacex.com/missions](http://www.spacex.com/missions)

There were only 18 flights in 2017. So, SpaceX also missed their target but
they might be in better financial health than Tesla.

For the most part defense of Tesla is similar to the ones seen for
Cryptocurrencies. People often go - "This is FUD and author is trying to
spread FUD to buy more coins. This coin is trying so and so technology. If it
succeds then the price is going to the moon. HODL".

That said I am curious to hear well reasoned arguments on what Tesla is doing
which is better than the others. Or rather going to do better.

------
neonate
[http://archive.is/CCY8Y](http://archive.is/CCY8Y)

------
carlivar
Another article that mentions the $35k Model 3, which is vaporware. The Model
3 starts at $49k, $54k with autopilot.

~~~
apsec112
Do you have a source for that? According to
[https://mashable.com/2017/08/01/tesla-model-3-true-cost-
more...](https://mashable.com/2017/08/01/tesla-model-3-true-cost-more-
than-35000/), the Model 3 only costs $49,000 if you buy it with an extra-large
battery pack and Autopilot. Those are cool, of course, but it's still a
perfectly usable car without them (220 mile range). The base price is indeed
$35,000, and that doesn't include tax incentives or any other "cheating".

~~~
well-here-we
The only version you can buy right now includes the extra-large battery pack
and the premium interior, which adds up to $49k.

Source: my reservation number has come up and that’s my only option.

~~~
jungturk
I suppose it hinges on how we define vaporware, but it’s consistently been the
case that the lower priced options arrive later.

Source: sub-$70k model S buyer who had to wait longer than preferred for that
to be available.

~~~
jfoster
I guess the way to resolve this is by asking, when does the $35k Model 3
become available?

Once the answer is known it's not vaporware, but until then Model 3 isn't
quite finished, as that's the one that many folk will be waiting for.

~~~
greglindahl
The answer, for your queue position, is:

[https://3.tesla.com/model3/delivery-
estimate](https://3.tesla.com/model3/delivery-estimate)

~~~
jungturk
Early reservation holders will see "Late 2018".

------
matte_black
I’m really glad I dumped TSLA stock while I still some profit. For a while I
had drank the koolaid and it really tasted good, I even had my preorder for a
Model 3. But it has become clear they aren’t that great as a car company.
Other manufacturers will surpass them, and then what? I rate this as a sell.

------
Zanni
"Saloon" as a British-ism for "sedan" is a new word for me. As for the
article, likely needing to "raise additional capital during the second half of
2019" is a far cry "uncomfortably close to the truth" of totally bankrupt.

~~~
rdl
"Estate" is British-ism for station wagon, too. (A model S wagon would be
pretty nice...)

~~~
rwh86
Such a thing does exist[1], though it's a custom build. Incidentally,
"shooting brake" is yet another British-ism for station wagon.

[1] [http://www.fullychargedshow.co.uk/tesla-model-s-shooting-
bra...](http://www.fullychargedshow.co.uk/tesla-model-s-shooting-brake/)

------
gerardnll
It's incredible how "the money" believes jokes, uses one accident to throw all
the work out of the window... I see how they believe on the project... As musk
said "It kinda sucks running a public company".

------
jpeg_hero
I thought that a Tesla bankruptcy would be cataclysmic. But then I realized
that Elon would kind of welcome it.

Spacex has established itself as a sort of technological monopoly, where its
launch prices are $70m, but the competition is $90m, but because of their
technological monopoly, and their true cost of launch is $20m. And now they
are on a launch cadence of every two weeks, (that is $50m in contribution
margin every 2 weeks, that is $100m in profit per mo., locked in _forever_
well at least until ULA has a competitive offering (forever+1).

With that as your option set, why fuxk around with 200 versus 300 cars made a
day.

F it, just bk it and be done with it.

~~~
tim333
"The point of [building Tesla] was, and remains, accelerating the advent of
sustainable energy, so that we can imagine far into the future and life is
still good."

It's not all about the money.

------
voidbip
How does Teslas strategy fit in with the ascendance of for hire vehicles like
Uber? It seems to me rich coastal types who can afford a Tesla, may just
decide to ditch driving all together and just "Uber" everywhere.

------
ameen
Tesla as a company will be fine if they start focusing more on other
initiatives (trailer trucks, solar panels, batteries, etc).

“Self-driving” fancy/family cars aren't a good solution for the future of our
already populated cities. Mass transit is. Hyperloop/TBC have a lot more
growth potential than Tesla's Model (x) line does.

I was one of Tesla motors' biggest fans but I can't in good faith support them
(not Tesla Inc) over a proper public transport solution. It is at best a short
term solution and doesn't push humanity forward.

10-20 years down the line I can see them spinning off the Passenger car
division, or they will see it impacting their other projects negatively.

~~~
jfoster
They should. It looks like Waymo & partners will easily beat them to market on
the electric & autonomous car future, anyway.

Big energy companies tend to have a market cap at least 10x big car companies,
anyway. That's where their future is.

The only way I see that they could turn the car business around is if they
somehow get to full autonomy in the market very soon, and then (per master
plan part deux) essentially are selling cars as a means of having car owners
investing in their autonomous rides network. The clock is ticking on that,
though; Waymo seem to be scaling very aggressively.

~~~
jijojv
Yes Google/waymo has been at it since 2009. Musk better deliver the self-
driving vaporware [1] he started selling since Oct'16 as shown in the video in
[https://www.tesla.com/autopilot](https://www.tesla.com/autopilot) before he
can stall the lawsuit [2] any further...

1\.
[https://www.hbsslaw.com/uploads/case_downloads/tesla_ap2/tes...](https://www.hbsslaw.com/uploads/case_downloads/tesla_ap2/teslaclassactioncomplaint.pdf)

2\.
[https://www.pacermonitor.com/public/case/21195146/Dean_Sheik...](https://www.pacermonitor.com/public/case/21195146/Dean_Sheikh_et_al_v_Tesla,_Inc)

------
duncan_bayne
They've been having a cash crunch since day one; the only reason they exist is
that the American taxpayer has been milked to the tune of $4.9 billion to
support them.

~~~
opsiprogram
how have tax payers been milked with regard to Tesla?

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

Now to be fair, that's a small fraction of the taxpayer funds used to prop up
a seemingly countless number of crony "capitalists".

~~~
tim333
>This $4.9 Billion figure has been thoroughly debunked. It includes
hypothetical tax breaks that Tesla could receive 20 years from now, discounted
loans that Tesla long ago paid back in full and in advance, and even money
from programs that Tesla never receives, but customers can potentially benefit
from.

(from Right-wing group led by Trump propagandist launches campaign against
Elon Musk, Tesla and SpaceX [https://electrek.co/2016/11/22/elon-musk-right-
wing-trump-pr...](https://electrek.co/2016/11/22/elon-musk-right-wing-trump-
propaganda-campaign-against-tesla-spacex/))

Apparently the "Trump propagandist" was Laura Ingraham who's recently getting
some news coverage.

~~~
duncan_bayne
Okay, say it's half that. It's still crony "capitalism", just the same as when
regular car manufacturers or coal mines receive subsidies.

How about not expecting taxpayers to subsidise _any_ industry?

Quibbling about the exact dollar figure doesn't change the moral issue.

~~~
microtherion
Air Pollution is estimated to cause ~200,000 early deaths annually in the US.
[https://www.sciencedirect.com/science/article/pii/S135223101...](https://www.sciencedirect.com/science/article/pii/S1352231013004548)

If an industry has a realistic prospect of making a serious dent in that
number, subsidizing it IS the "moral" thing for a government to do, in my
opinion.

------
mml
sure is quiet in here.

