Tesla Suffering Cash Flow Issues; Every Model S Means a $4,000 Loss

An anonymous reader writes: The latest reports from Tesla show a trend of missing positive cash flow targets. Despite previous guidance to the contrary, Tesla is losing more than $4000 per car in operating margin and no sign of near term improvement as they are now reducing their production targets at a time when they are also experiencing pricing pressure. A scan of articles published today on this news reveals a common opinion that Tesla will need to raise more capital soon. A small slice of the Reuters report linked: Tesla has signaled capital spending will drop next year because the company won't be spending on a major vehicle launch. In 2017, Tesla plans to launch its Model 3 line, which the company says will start at about $35,000 and push total sales toward the goal of 500,000 vehicles a year by 2020. Barclays analyst Brian Johnson disagreed with the company's estimates, and said he expects Tesla's capital spending will go up in 2016 and 2017 as the company ramps up its battery factory and Model 3 development. "Their small scale means the cash generation is not as great as they might have hoped for," he said.

Comments

The hell you say...

[rmdingler]

Gaining market share in an entrenched industry by turning convention on its head may not be extremely profitable at first.

Despite that, it still works sometimes: are Jeff Bezos' ear's ringing?

Disrupting status quo

[Anonymous Coward]

Musk has repeatedly said that he's far more interested in changing the world than in making money. The dollars and cents are merely a vehicle for his visions.

A huge risk, that's paying off well

[MoogMan]

Tesla took a huge risk by taking a completely new technology (battery-powered cars) and applying it in a completely new and untested way (performance car). They went into it knowing that they'd be taking a loss for the medium term.

If Tesla are already at taking only a $4k loss / 10% loss, they're doing extremely well:
- The "Supercharger" units that are being aggressively installed across many countries will be accounted for within this unit cost... It won't be long until they reach diminshing returns on their deployment, and the impact of this will tail off.
- They added a number of new product lines, all sinking huge money into R&D. They're close to establishing a range of products so the impact of this will tail off shortly.

Musk could easily choose to add $4k to the sale cost of each cars with minimal impact and result in a 0-dollar P/L, but increasing production count ensures far better long-term return by economies of scale improvements, as well as learning opportunities when scaling aggressively.

Re:Good riddance, Tesla

[Skuld-Chan]

What do you think provides the 220 voltage to the connector outside your house or to make the hydrogen or to make the steel to make the cars (or bicycles)?

http://blogs.wsj.com/numbers/m...

We have a long way to go still ;).

Tesla "Losing Money"

[PopeRatzo]

Let's look at a few other companies that are "losing money"

1. Sony
2. Sprint
3. Amazon
4. Instagram
5. Snapchat
6. Box
7. Twitter