By on September 25, 2014

Tesla HQ

According to the financial overlords of Goldman Sachs, Tesla would need an $6 billion in capital within the next 11 years should its products become truly disruptive to the automotive industry.

Per Bloomberg, Goldman Sachs analyst Patrick Archambault delivered that number to his employer’s clients Wednesday, based on what he believes would be needed should Tesla’s electric lineup prove as popular as the iPhone 6 or Model T. The proclamation knocked the automaker’s shares down 1.7 percent to $259.32 on the trading floor in New York at the final bell.

Though Tesla CEO Elon Musk plans to sell a minimum of 500,000 units per year down the road, Archambault claims the capital needed would push annual production from 1.8 million to 3.2 million units by 2025. Other projects, such as the upcoming Gigafactory battery pack plant in Reno, Nev., would also need some of the projected $6 billion in additional capital. He adds that most of the $6 billion would be distributed from 2017 through 2025.

Meanwhile, Tesla has not given its own forecast for capital spending, according to representative Simon Sproule.

Get the latest TTAC e-Newsletter!

Recommended

29 Comments on “Goldman Sachs: Tesla Needs $6B In Capital To Meet “Disruptive” Growth...”


  • avatar
    Big Al from Oz

    It seems the only way that Musk can achieve this is through regulation and handouts.

    I wish my job was as protected.

    Social/industrial welfare.

    • 0 avatar
      Vega

      Just like the auto industry benefited from the government handout called interstate highway system. Or how the internet was initially built by the military. Or how the aerospace and electronic industry benefited strongly from government spending on defense…

      I get that you don’t like electric cars, but don’t kid yourself into thinking the gas engined car’s history was a pure result of an objectivist dream scenario.

      • 0 avatar
        Ihatejalops

        Hmmm. Pretty sure automobiles were accepted as part of culture before the Ike system. Big Al is somewhat right on the success of Tesla; nothing happens without tax breaks and handouts. Electric vehicles are far too inefficient and “refueling” times are way too long. That’s the rub. The crap range, refueling and mileage variance.

        • 0 avatar
          Xeranar

          Sorry, this argument is painfully partisan. Nobody minds that the oil and mining businesses get tax breaks to offset the depletion of their assets (even though that is not something normally done for other industries in this manner). Never mind that the largest corporations in the world that support right-wing agendas are gladly seeking handouts and tax breaks but the fixation on Tesla is largely one driven by a political party seeking to use it as a cover for their quasi-agenda.

          The right-wing in America pays great lip service to the idea of ending subsidization but when asked to cut their own corporate ties they wither and wilt like day old cabbage in the sun. Lets not confuse the high ideals with the reality of the world. Without government intervention in stable markets the monopolized markets would never be changed. Business is the greatest and only rival to government.

          • 0 avatar
            Ihatejalops

            The left wing loves tax discounts too, hello hollywood! Anyway, the discussion of tax breaks for oil companies vs. an electric car company is vastly different. One provides the energy for our country, the other is a vanity project for rich people which is amazing antique in concept. He’s largely funded his company through the tax payer grants and provides zero value to society. Other alternative energies have far more societal impact and military where electric power has minimal economic impact. Oil, provides jobs, allows us to reduce our dependence on foreign oil and pays down our trade deficit.

            Should any companies receive tax breaks? In a perfect world, now way. But you’re wall street buddies get them all the time. And if you sit there and think about value provided instead of saying that it’s a republican thing when you have no clue of political leanings, then you might think differently.

            BTW, Large corporations support big gov’t and regulation because they can afford it. why do you think cable/internet companies are pushing for internet restrictions? They love democrats. Look at your wall street donors. Don’t come in with an agenda.

          • 0 avatar
            Xeranar

            The difference is on the left we don’t dislike all forms of corporate tax breaks. If anything we’re driven more by attempts to promote public goods and economic growth. It has nothing to do with the core ideological positions selling faux populism. Never mind that you made some serious subjective argument to justify the oil industry tax breaks.

            Your whole follow up argument is basically partisan posturing that ignores that Republicans and conservatives are on-board with the same internet regulation. The difference is that the Democrats I support (i.e. the liberals) like Elizabeth Warren and Sherrod Brown are against it. Partisan justifications are still partisan.

          • 0 avatar
            stuki

            “The Argument” in isolation is not partisan. Nothing particularly partisan about being opposed to graft, period. Even when the man on TV says “thiiiis tiimme, graaaftt iiis gooood.”

            With the benefit of hindsight, the freeway system kind of sucks anyway. Had the government stayed out of it, the rail/pave mix and size vs handling tradeoffs in cars would have ended up closer to ideal than what we are stuck with today.

    • 0 avatar

      I don’t think Musk will have any problem raising such capital privately. Judging by the stock price of Tesla folks are tripping over their own Di$%s to invest in this company and technology.

      • 0 avatar
        Xeranar

        Pretty much, JP. I saw the six billion and thought that’s actually pretty easy to squeeze out of the market today with his profile. Just selling non-voting class B stocks (essentially a long-term bond) for 6 billion would be piddling.

        • 0 avatar
          CoreyDL

          I was thinking that as well. It’s very easy to get large sums of money from a bank or other financial institution. They all have capital which they can lend you at low interest rates in this environment. It’s not like Tesla is really a bad risk anyway.

          Go call Wells Fargo and Chase, and maybe one more – and that ought to take care of it. Set up a couple letters of credit.

      • 0 avatar
        Dr. Kenneth Noisewater

        IIRC Tesla’s bond yields are still lower than comparable yields for US Treasuries.

      • 0 avatar

        $6 billion isn’t a lot of money in the big scheme of things. If Tesla achieves economy of scale via volume it can finance some of the needed capital out of gross profit. Then there is the factory owned dealer network, just waiting to be sold off to private investment (franchise dealers) for large multiples. There are a LOT of IFs. To get to the point of needing the $6 billion Tesla needs to overcome or dramatically improve on the caveats mentioned. Recharging time needs to be shorter. The car needs to function better in cold weather conditions and autobahn conditions. Tesla needs to work out a better way to take trade ins. There is no way they reach volume levels without being able to facilitate consumers gaining the tax credit for their trade in. Tesla will need to establish some method for inventory buffering, other than building vehicles and parking them in the field or starting and starting the assembly line.

        The list goes on.

  • avatar
    mkirk

    But let Tesla introduce a damn midsize truck and you’ll be talking up how great they are. Maybe he’ll make that 6 billion with that other business of his.

  • avatar

    Whatever the struggle with upcoming hydrogen (Toyota)… “fossil” will definitely benefit if hydrogen and electric become a major force in car making and sales. Fuel prices will go down, making it more attractive to go for an ICE car.

    • 0 avatar
      Vega

      Don’t think so. Once demand goes down, some refineries become unprofitable and close. Crude oil not used for refining is then going to be used for other products (e.g. chemical production). I wouldn’t hope for falling gas prices…

    • 0 avatar
      Xeranar

      Unlikely. The shift of first world countries to Electric & Hydrogen will stabilize the price of oil around the world for a time but unlike some magic oil fairy that just hands out barrels of the toxic goo the oil is largely controlled by OPEC and a handful of periphery players (including the US). If a sizable portion of the domestic oil market ceased the OPEC et al association would either decrease production to off-set losses in order to keep the market stable OR ship more oil to countries willing to use it.

      It’s a limited supply, we’ve hit peak oil, OPEC knows the value of oil is going to decrease over the next 30 years simply because of the inevitability of the rise of Hydrogen/Electric for every day use. Their best bet is to get as much as they can now and slowly phase out older production units as necessary.

  • avatar
    Volt 230

    So we should all wish that EV and hydrogen vehicles do well in sales numbers.

  • avatar
    Conslaw

    Tesla’s market capitalization (the theoretical value of all of its outstanding stock) is already $31 billion. Most of that money the company never saw because it handed out the stock to insiders or the stock was sold early on when it was much less expensive. Still, it is likely that Tesla could raise all of the $7 billion in the stock market easily IF it were willing to devalue the shares of current stockholders. One way of minimize this is to do an issue of warrants (stock options) to current stockholders.

    • 0 avatar
      heavy handle

      Exactly, 6 billion over 11 years is nothing if they continue to be successful.

      • 0 avatar
        Ihatejalops

        How the hell do they have a market cap like that? They only SELL about 25K cars total. A bubble methinks we’re in. Plus, the globe is not demanding more batteries. A bubble methinks we’re in.

        http://blogs.barrons.com/stockstowatchtoday/2014/09/03/tesla-motors-too-many-batteries-not-enough-demand/

      • 0 avatar
        Pch101

        Tesla keeps generating losses. To refer to it as “successful” is a bit premature.

        The management is talented and the brand building has been solid. But they can’t turn a profit and don’t appear to be on track to make a profit. The market cap is simply ridiculous; the operations don’t generate anything that comes close to justifying that stock price.

        • 0 avatar
          heavy handle

          The market cap is based on the expectation of future growth and profit.
          Their current turnover and profitability is not a major factor since nobody expects them to be flat from quarter to quarter (unlike established players).
          Mind you, some people expect them to crash and burn, but that doesn’t seem to have a huge effect on the market.

          • 0 avatar
            Pch101

            You say that as if there is some rational basis for the projection that should be driving the valuation.

            In this case, there isn’t. This is about the dumb money paying far too much for something that just doesn’t pencil. Automakers need scale, and Tesla doesn’t have it and isn’t likely to get it.

          • 0 avatar
            heavy handle

            Only fools claim that markets are rational.

            If you think that Tesla investors are “dumb money,” then you can be the “smart money” and short the stock.

            This whole Tesla thing bring me back 15 years when people were having the same conversations about Amazon: “they’ve never made a profit” “it’s all virtual money” “they won’t be around in 5 years” “you can’t make money in retail without brick and mortar” “industry leaders could build their own (web presence) and wipe (Amazon) off the map”.
            All valid objections, all steamrolled by a determined company with a vision. Not saying history will repeat, but it could.

          • 0 avatar
            Pch101

            Shorting a stock is generally a bad way to respond to the dumb money. It’s hard to predict how dumb the market can be, or for how long.

            There are rational ways to value companies. You don’t seem to be aware of them, but they do exist, and they are used much of the time.

            Tesla is a notable exception. Like the dot.bomb stocks of over a decade ago, there seems to be more hope than analysis going on here.

          • 0 avatar
            Dr. Kenneth Noisewater

            Blah blah blah, buy some LEAP puts and cash in if you’re so bearish on TSLA.

  • avatar
    Conslaw

    By the way, General Motors, Ford and Honda all have market caps in the low $60 billion range, about double Tesla’s. Volkswagen’s cap is $80 billion. In comparison, Toyota is a giant at $200 billion, but that’s only half of Google’s $400 billion cap. Apple is worth an additional Toyota at $600 billion, roughly 2 Walmarts. Do you love your PS4? Sony’s market cap is under $19 billion, only 2/3s of Tesla.

  • avatar
    stuki

    11 years, huh. Precisely $6 billion! Wonder how much of the cost of that report the author will have to pay back when it turned out he was just pulling nonsense of of his rear?

    Of course, who cares about such pesky details as reality, when all money is created by the process of financing, and whether one gets financed depends on whether Goldman can pretend it’s various assets are money good……

  • avatar
    mkirk

    Screw it, If they are still around in 3-4 years I am going to shop them.

Read all comments

Back to TopLeave a Reply

You must be logged in to post a comment.

Recent Comments

  • Tele Vision: The word ‘myriad’ used correctly. Finally.
  • -Nate: No one will ever accuse todd of being honest, fair mined, compassionate and anything but a corporate alt right...
  • -Nate: Just so . I didn’t like the S10’s when they came out but millions of hard miles in fleets changed...
  • ravenuer: Ok, I get your point.
  • Inside Looking Out: I can assume that all of them are disposable, throw away cars. So I would not buy any if it comes...

New Car Research

Get a Free Dealer Quote

Staff

  • Contributors

  • Timothy Cain, Canada
  • Matthew Guy, Canada
  • Ronnie Schreiber, United States
  • Bozi Tatarevic, United States
  • Chris Tonn, United States
  • Corey Lewis, United States
  • Mark Baruth, United States