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Tesla Burns Through Record Cash To Bring the Model 3 To Market (bloomberg.com)
Dana Hull, reporting for Bloomberg: Tesla's Elon Musk keeps getting the green light to do what it takes to bring electric cars to the masses, regardless of how much it's going to cost. The company burned through $1.16 billion in cash in the second quarter by spending on capacity for its cheapest model yet and boosting battery output. Investors fixated instead on what Musk said is coming next: Hundreds of thousands of Model 3 sedan deliveries, installations of solar roofs and an all-new semi truck to add to the lineup. "This is the best I've ever felt about Tesla's future," Musk said on a conference call. The stock surged as much as 7.4 percent to $349.94 as of 9:45 a.m. Thursday in New York, the biggest intraday gain in four months. The chief executive officer has built a fanatical following of Tesla shareholders who continue to throw their support behind his clean-energy vision. It helps that consumers keep opening their wallets: The Model 3, which starts at $35,000, has racked up almost half a million reservations and is drawing more deposits by the day. The record negative free cash flow Tesla reported for the three months ended in June was almost double the $622 million it went through in the first quarter. With a little more than $3 billion in cash on hand, Musk told analysts the company is thinking about raising money through a debt offering.
Has been out for awhile and nobody is buying it. What's better about the Model 3?
I can't speak for everyone, but the two reasons I am buying a Tesla Model 3 is the better performance and the over the air updates. Most car models have all their features on day one and any new updates are only for future year models. This is not the case with Tesla. I'll give my money to Tesla for almost no other reason than to support a company which does this.
-- All that is necessary for the triumph of evil is that good men do nothing. -- Edmund Burke
DO NOT BUY A LEAF. The Chevy Volt, Chevy Bolt, Zero S, and Tesla Model S/X/3 all have high-quality battery management systems with thermal management. The Leaf's lack of a TMS causes their battery to degrade rapidly, losing as much as 40% of its capacity in 2-3 years; whereas the Tesla, Volt, and Zero have shown little to no loss of capacity over half a decade and hundreds of thousands of miles.
Get a used Volt. They're ass-cheap. Just don't buy a Leaf, holy shit dude.
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$1B backlog? There's nearly half a million reservations on a $35k-base vehicle (average expected sale value after options (luxury, performance, extended range, etc) = $43k). The Model S has a profit margin of about 25% per sale and they expect similar on the 3. You're looking at nearly $20B in sales and $5B in profit just from the already accumulated waiting list, which is increasing by about 1800 new reservations net every day.
If Tesla manages the "production hell" ramp-up without any serious glitches that cause excessive delay / QA problems / expense, they've got it made.
So, apart from that, how was the play, Mrs. Lincoln?
As an Independent (yet a fiscal conservative who is repelled more by most Democratic tax plans than Republican ones), I'd question your assertion that "most Republicans" believe in the theory that rich people and corporations will start to "create jobs" only when they accumulate enough cash.
That's another way of talking about the "trickle down economics" which were out of the 1980's Reagan era, and were really just based on an untested economic theory at the time. Reagan's cabinet members succeeded in selling him on and supporting, so they could try it. It didn't work, primarily because they underestimated how many successful companies have little or no interest in more growth. (Even giants like Apple exhibit this tendency today. No matter how much money they make? They still cling to a business model that says it's perfectly acceptable to build computers that only cater to a relative niche in the marketplace. Apple doesn't even try to build Enterprise gear for server rooms anymore, leaving that whole sector to other companies. It doesn't even attempt to make its own mail server -- opting instead to build its Mail and Calendar clients around Microsoft's Exchange solution. Sometimes, adding too many new employees and expanding into too many areas just dilutes the formula that makes you successful. So profits aren't sensible to dump back into business expansion.)
I have no problem with Tesla's business model right now. I think Elon Musk is a very intelligent guy and a pretty decent leader, who really believes in the technologies he's trying to develop and market. That said though? He's definitely operating a company that greatly benefits from government loans, perks, subsidies and initiatives. In a more libertarian society, I'd like to see much less of that happening. But today, it is what it is. We voted for a bigger government than I personally like, and it's one that likes to take a lot of our tax dollars and spend them, directed at specific things it thinks are "best for all of us". So many subsidies have gone to fossil fuel based companies, it makes it really difficult to single out Tesla as the "bad guy" for receiving some now.
The Ford Taurus, in 1980s dollars, cost ONE BILLION DOLLARS. Which is roughly TWO POINT FIVE BILLION DOLLARS today.
"Development for the first-generation Taurus started in the early 1980s to replace the Ford LTD,[2] at the cost of billions of dollars, with a team led by vice president in charge of car development Lewis Veraldi dubbed "Team Taurus."
https://en.wikipedia.org/wiki/Ford_Taurus_(first_generation)
Ford spent more money bringing the Taurus to market than it cost to research, develop, and deliver the first F117 to market.
Manufacturing cars is expensive. But by historic norms, Tesla is far ahead of the established big boys in bringing an entirely new design to market.