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.

Comments

it's not "burning cash"

[sxpert]

it's buying hardware and services to set up the production facility... big difference burning cash would be spending it on things that don't do anything for the company, such as distributing dividends and cash executive bonuses...

Re:it's not "burning cash"

[ranton]

it's buying hardware and services to set up the production facility... big difference
burning cash would be spending it on things that don't do anything for the company, such as distributing dividends and cash executive bonuses...

Considering the terminology for how much they spend each month is their "burn rate" I don't see how burning cash is that inaccurate of a description. Probably evokes some misleading connotations but these are the terms the industry is using.

Re:it's not "burning cash"

[sxpert]

it shows "the financial sector" has it's priorities reversed if they seem to think "investing in production machines" is "burning cash"

Re:it's not "burning cash"

[fruey]

Well the cashflow is negative, for sure, but it's a long term investment strategy. Headlines are getting more clickbait-reinforced by the day.

Re:it's not "burning cash"

[AlanObject]

it's buying hardware and services to set up the production facility... big difference

Absolutely. This post should be modded up 1000.

What this also represents is a near perfect case study as to why most Republicans are sheer nonsense when it comes to the economic of taxation. They will try to convince you that if rich people and rich corporations accumulate enough cash they will start to "create jobs." So we need tax cuts or else nobody will create jobs.

Pure BS. There is one reason and one reason only that a (well run) corporation will spend money to create jobs. It is because they are following a business plan to get customers to buy their service or product. Because they see a market they can win at. Anything else and they will turtle up and hoard cash and lay people off if necessary to stop bleeding.

In this case Tesla has a $1B backlog. They know the customers are there and they are using a lot of its available cash to employ people. Either directly or by buying stuff from their vendors. Tesla has nowhere near the amount of cash on hand than many companies that are looking for a tax cut.

So this is why they are not "burning cash." They are generating revenue. Profitable revenue which they will likely spend, not burn, creating the next generation product to expand their market space.

Re:it's not "burning cash"

[jimtheowl]

"This post should be modded up 1000."

That would be burning mod points.

Re:it's not "burning cash"

[Rei]

$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.

Re:Chevy Bolt

[sxpert]

said government money was paid off with interest aeons ago

Re:Chevy Bolt

[ranton]

The Tesla isn't built by a company that swallowed a bunch of taxpayer money in a big government shell game to survive...

Oh wait...

Every company takes advantage of government programs to exist. Public roads, public education, intellectual property protection, military protection of sea lanes, etc. Tesla probably owes its existence more to our universities for producing its engineers than it does to tax incentives.

Re:Chevy Bolt

[sxpert]

that's a budget issue. how about stopping the idiotic, unwinable war in afghanistan, and spend that money on electric car incentives (severa hundred billions a year)

Re:Chevy Bolt

[Rei]

Has been out for awhile and nobody is buying it. What's better about the Model 3?

Lol, okay, let's go down the list. Bolt vs. Model 3. Just the base models (Model 3 is much more upgradeable)

MSRP: $37500 vs $35000
0-60: 6,5s vs. 5,6s
Top speed: 90mph vs. 130mph
Handling: Read for yourself (start at "What's blanching...")
EPA range: 238mi vs. 220mi
Max charge speed: 90mph vs. 260mph
Fast charge network: Poor (single stall, poorly monitored, big holes) vs. excellent (4-8+ stalls, widespread distribution on almost all major interstates)
Dealership experience: Famously hard sell and uneducated about EVs, vs. almost humorously soft-sell, behaving instead like museum curators who just want to talk about their exhibit
Automatic crash avoidance: Optional extra vs. standard
Climate control: Single vs. dual zone
Track record for safety: less-than-stellar vs. outright-insulted-if-they-score-less-than-perfect-in-any-test. And this.
Standard warranty: 3yrs / 36k mi vs. 4yrs / 50k mi (both have the same battery warranty, 8 yrs / 100k mi)
Company dedication: Makes EVs as a side project to their main business vs. fully invested in EVs.
Efficiency: heavier & higher drag vs. lighter and lower drag
Styling: Come on, is there any contest? Even remotely? Bolt vs. Model 3. The interior difference is even worse, with the Bolt being your typical econobox interior (yet at a nearly $40k price point).
Depreciation of past models: Terrible vs. Low

I could keep going. I mean, there's just no contest. Unless you're seriously in a rush, or you think Musk is the devil, I can't imagine why anyone would pick the Bolt over the Model 3.