Elon Musk's $500 Million Moonshot, and It's Not About Cars
Tesla filed Thursday to sell nearly $500 million in shares of its company to raise capital and cover investments the electric carmaker plans to make in the future.
According to the filing with the U.S. Securities and Exchange Commission, the proceeds will go toward the company’s planned investments in the Model 3, Supercharger network and its Gigafactory battery plant in Nevada.
By the book, the stock sale is a short-term pain for long-term gain. Exposing Tesla further to the market carries certain risk, especially considering Tesla’s price growth and relative upside-down balance sheet, but if historical stock prices are any indication, it’ll be a cash cow. Elon Musk asking to buy $20 million in his own stock has pumped up the prices too beyond any distillation worries.
But don’t be mistaken: the second stock sale isn’t really about the cars.
Tesla’s long-term plans certainly aren’t to sell cars at a $4,000 loss per vehicle. And if you had asked Ford or General Motors 120 years ago if they’d rather be in the consumer vehicle business or the consumer energy business, Exxon and Chevron consistently rank in Forbes most profitable businesses — Ford and GM do not.
A spokesman for Tesla said their only comment on the stock sale is what is included in the prospectus. Specifically outlined in the prospectus is capital expenditures for Tesla including the Model 3, Supercharger network, service, stores — and its Gigafactory. So it’s clear that cars factor into the short-term future for Tesla.
But churning a profit by 2020 may include more than just selling cars at a loss and so far, Tesla has been run like an idea factory and marketing agency — not a car business.
If Musk can convince the world that harvesting and storing your own power is a good idea, would Tesla get out of the car business entirely? Or is this an automotive dream Elon is willing to captain to the bottom of the sea should Tesla cars continue to anchor the company with thousands of dollars in losses per unit for the foreseeable future?
More by Aaron Cole
Comments
Join the conversation
I thought it was obvious that they want to be a battery company when they opened up their patents for anyone to use, and Tesla would be more than happy to provide the batteries. Also, repeating the nonsense of "losing $4k per car sold" really diminishes credibility. Yeah, I get that it's a soundbite & filler, but it still reflects badly on the overall article.
I think Tesla (and Mr. Musk) have been pretty straightforward from the start on their plans. Clearly, R&D is expensive, especially when you use one market's profits to fund R&D or development of another. Look at the *massive years* of losses Microsoft took on making Xbox a household name. If Xbox had been it's own company, it would have gone bankrupt several times over. Windows sales paid for that development. For Tesla, Elon has always said energy independence was his goal. he felt that no one was innovating in off-grid power options, or in true electric cars, and he felt both would be needed to reach independence. And so, here's Tesla trying to do both. It's not surprising. he also noted that no new Rocket engine designs had been created in literally decades before SpaceX (hence the massive buying of russian rocket engines by ULA to this day), and he flet that human spaceflight wasn't a priority anymore either. So, he created SpaceX to be a rocket company, with the goal of human spaceflight. And he uses launches to fund a massive R&D effort towards human spaceflight. For Tesla, "selling cars at a loss" is a lot like the Xbox problem - a TON of money is needed to build infrastructure, on Research and Development, and production. I can't imagine anyone scaling a car buisiness of any kind based on ramp-up sales - you need more money than you can generate in the early years. Battery tech has been lagging in the US, so you create that infrastructure, realizing that in the long run all of these investments will support those two goals: electric cars and energy independence. Of course they lose money on every vehicle sold. But that's because the vehicles, while an end in and of themselves, are also a revenue generation device for all the other bits that are needed to fully realize the idea of volume electric cars, and personal energy independence for homeowners.