Tesla May Need Cash To Deliver On the Model 3, Says Analysts (cnbc.com)

An anonymous reader writes: After receiving more than 198,000 Model 3 preorders in the first 24 hours, Tesla may need more cash if it hopes to deliver their new electric vehicle to customers on time, analysts said. Elon Musk plans to launch the Model 3 in late 2017, eventually boosting the company's annual production tenfold to 500,000 by 2020. Many analysts believe some customers making early reservations may not receive their vehicle until 2019 or 2020. Morgan Stanley analyst Adam Jonas, predicted Tesla's sales will hit under 250,000 in 2020. Barclays analyst Brian Johnson, believes the surge of Model 3 reservations could reach 300,000 by the end of June. Some analysts expect the first cars will sell for an average of $50,000-$60,000, but Tesla prices its current models in several "tiers," depending on content and optional features. RBC analyst Joseph Spak said strong initial orders for the Model 3 could help Tesla achieve positive free cash flow. In February, the company said it expected to be cash-flow positive in March. Spak said Tesla may not be able to fulfill many of the early orders before 2019: "Demand was never really our concern, it is more about execution and getting production up to meet demand."

Comments

Err - no.

[queazocotal]

There are many commercial entities that would be overjoyed to finance Tesla some billions based on the outstanding pre-order book.

Re:Err - no.

[N1AK]

Demand alone doesn't mean things are great for Tesla, though I'm certainly not claiming there is an issue. If there's huge demand now for something that can't viably be provided at the expected price point in an acceptable time period that's an issue regardless of immediate cash flow issues. I really want Tesla to succeed and it's great that a lot of other people clearly do as well, but that alone doesn't make it a certainty.

Re:Err - no.

[Richard_at_work]

An existing order book does not show you everything about the company that you need to know about in order to risk an investment - look at Boeing, nearly 1000 orders for its flagship 787 model before it even flies, forecast of massive profits ahead, but now just breaking even on *production* costs after about 380 deliveries, massive deferred costs (meaning that the development costs are yet to be covered - infact, Boeing hasnt started paying them back yet), massive debts, an accounting block of well over 1100 now (unheard of for a twin engine aircraft), on the brink of announcing a forward loss position. Boeing will eventually make a profit on the 787, but its far from the slam dunk the company was pitching back in 2004.

Tesla having a huge order book is great, they just have to follow through on it.

Re:Err - no.

[known_coward_69]

building a factory and cars are two different things. they built a factory but they still need to buy the parts and other raw materials to build the cars and pay the daily bills. for this you need cash long before you see the first dollar in revenue of selling a car

Re: Err - no.

[rworne]

I'm wondering how many cancellations they will get once people find out the $7500 fed tax rebate is no longer available. This is lowering the cost of the car to $27,500, which frankly is a hell of a deal.

At this point, Teslas are still eligible, but once they hit the magic number (200K cars sold in the US) rebate goes bye-bye. Based upon preorders, latecomers are going to miss out if they have not already. Tesla sold what? 60,000 cars in the US so far? There's 140,000 left to be sold in the US before the rebate phases out and meanwhile the Model S and Model X are still eating away at the total sales numbers while owners wait for delivery. Tesla sold 18,000 Model S's in in the US in 2014, and 27,000 in 2015. I'm expecting a lot of disappointed potential buyers in a year or so.

Re: Err - no.

[ranton]

The rebate doesn't go away at 200,000 cars. That just marks the quarter the rebates start to fade out. For that quarter and the next, the rebate is still $7500. The next two months it is reduced to $3750, and the next two months it is $1875.

Tesla will likely hit 200,000 cars delivered in the US in 3rd quarter 2017. That means every tesla delivered in 2017 will probably get a $7500 rebate. Every car delivered in Q1/Q2 2018 will get $3750, and the rest of 2018 gets $1875.

It is entirely possible that hundreds of thousands of Model 3s will get a rebate. Of tesla is smart they will delay shipments of model S/X cars until 4Q 2017 so they get amother full quarter of $7500 rebates to entice customers.

Re: Err - no.

[FlyHelicopters]

I'm wondering how many cancellations they will get once people find out the $7500 fed tax rebate is no longer available. This is lowering the cost of the car to $27,500, which frankly is a hell of a deal.

It would lower it to $27,500, if most people bought base model cars.

In general, they don't. Everything from the Ford Focus to the Tesla Model S are sold are higher level trims.

In addition to the rebate going away at some point, when people see that the Model 3 will really be $50K with all the options on it, that will draw a lot of cancellations.

Musk was really careful with his words: All Model 3 cars would come with autopilot hardware installed, and the base model would come with the emergency braking feature active.

The base model doesn't come with a lot of stuff turned one, which has to be paid for separately.

Tone

[Anonymous Coward]

The tone of the article is a little off, like the author wants Tesla to fail for whatever reason, and is grasping on the flimsiest available reason he can find.

"Your product is in such high demand that there's no way you'll be able to produce enough! Take THAT, Elon!!!"

Re:Tone

[Anonymous Coward]

"Nobody goes there anymore. It's too crowded."

Personalization

[Psicopatico]

Can I have mine with carburators, please?

Love to tweak those things...

Astrological stock analysis

[Okian Warrior]

There are many commercial entities that would be overjoyed to finance Tesla some billions based on the outstanding pre-order book.

And even more commercial entities that would be overjoyed if Tesla crashed and burned.

Analysts are falling over themselves trying to paint Tesla in a bad light. Usually this is done by "black-box analytics" without taking the context into account. We're seeing this in the original article: massive public demand is bad for Tesla because it will hurt them in the long run.

For example, Tesla has had little or no profit for the last couple of quarters because they're putting everything into the gigafactory. Looked at as a black box, Tesla is a company with little or no revenue.

...but this doesn't account for the gigafactory, or that Tesla will pretty-much corner the market in cars *and* lithium batteries in a couple of years.

The price point of Tesla is all over the map, analysts put it anywhere from $100 to $1900 .

It's insane. There's a subtext among certain analysts and pundits that they are *only* dissing Tesla because they want to bolster their GM stock. Then there's the analysts and pundits who put sterile figures into an algorithm and come up with a "buy", "sell", or "hold" outcome and then justify that outcome (any outcome, it doesn't matter) from whatever is going on at the time.

There's literally(*) no source of reliable information about stocks that a common person can access.

So far as I can tell, the best you can hope for is to have an engineer's understanding of the context and make an educated guess. Company is working on an implantable insulin delivery device? If you think the concept is feasible, it's probably a good bet. Can a company makes a razor that cuts hair with a laser? Probably not a good bet.

Reading analysts predictions about stocks is worthless. You can get just as good information by plotting a stocks' astrology chart.

(*) I'm using the term "literal" by it's dictionary definition.

Re:Astrological stock analysis

[joh]

No company with pre-orders of this magnitude can or should have cash problems. It's a bit like SpaceX: They have cornered the market for launches in the classes they can launch and are booked for years. This is not money that is already earned but it is the next thing close to that. If you have cash-flow problems in such a situation and if you do not look like a scam getting money for modest interest should be the most easy thing in the world.

But yes, people wanting to buy 200000 cars from them will be bad news for those companies who will NOT sell these 200000 cars then. These will not be additional cars, mostly. Almost all companies in this business apart from Tesla will HATE these numbers.

Re:Astrological stock analysis

[Bender0x7D1]

...but this doesn't account for the gigafactory, or that Tesla will pretty-much corner the market in cars *and* lithium batteries in a couple of years.

However, the market for electric cars is a small percentage of overall vehicle sales. According to Wikipedia, Toyota delivered 9.9 million cars in 2012, VW delivered 9.8 million in 2013 and GM delivered 9.9 million in 2015. So, even if Tesla could deliver all 300k cars in 1 year - and it sounds like they can't - it would represent 3% of what the giant automakers deliver in a single year. Given their timeline for delivery, it is more like 1%.

Now, don't get me wrong. I think Tesla is a cool company, and I don't think it's doomed because it "only" has a 1% marketshare. However, we need to consider it in context of the entire automotive industry, and it most likely won't end up as the one car company to rule the world.

Comparable to Chrysler

[flyingfsck]

Those kind of figures would instantly put them on par with a smaller manufacturer such as Chrysler. Great if they can pull it off.

Re:need Cash?

[LynnwoodRooster]

Bill Gates could buy Elon 5 times over, and still have enough money left to crack the the top 50 wealthiest people in the US. And much of the wealth of Musk is in Tesla shares - shares that would be worthless if the company cannot deliver cars (and would take a big hit if he started liquidating large numbers of the shares to try to finance Tesla himself).

Re:A fool and their money is soon parted.

[Shirley Marquez]

The people who are already happily driving the previous Tesla vehicles would dispute that. Whether Tesla will be able to successfully mass produce the Model 3 remains to be seen, but it is clear that an electric vehicle can meet the needs of some drivers.