By on August 9, 2015

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After Tesla Motors announced last week that it had lost $184 million in the second quarter of this year on lower vehicle deliveries and higher spending on its factory ahead of a new model, analysts say the company could have a bumpier road ahead if it can’t raise cash soon.

According to a Reuters report, Tesla is losing $4,000 on each car it sells, and the company’s ability to raise capital could be severely hampered by its spending now and its inability to create positive cash flow in a luxury market that is extremely favorable.

“A capital raise, given the way they’re burning cash today, given the fact that they have future investment needs, seems very likely at some point,” UBS Securities analyst Colin Langan told Reuters.

Despite favorable press and an extremely effective marketing plan, Tesla has only one profitable quarter in its history and the automaker doesn’t project a cash-positive year until 2020.

Tesla’s stock tumbled more than 10 percent Thursday after the announcement and closed Friday still down around 10 percent from its one-week high.

The story points out that Tesla has had tough times before. In 2012, Tesla CEO Elon Musk steered the company out of a cash crunch and renegotiated a federal loan and sold shares of the company to raise money ahead of the Model S launch.

Musk faces a similar quandary now, ahead of the Model X launch, but with a challenged budget sheet, significantly higher investments in production and more competition in the market.

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94 Comments on “Report: Tesla Losing $4,000 on Each Car, and is Burning Cash Faster...”


  • avatar
    Pch101

    Tesla has a losing business model but outstanding management. (Musk may be a huckster and an annoying one at that, but he also has real talent.)

    If the company manages to go the distance, then it will be because of the people. Then again, it wouldn’t hurt if batteries got a lot cheaper to make.

    • 0 avatar

      What if Elon locked people into 10 year (or 12 year) payments on a Model S/ P85/ P85d to:

      #1 stretch out payments.
      #2 earn more interest in the long term.
      #3 capitalize on excitement which wears off with each and every new Hellcat release.

      A P85 is about $100,000.

      72 Months at a 3% is about $1519 ($9400 interest paid)

      Stretch that puppy out to 144 months and that payment drops to $827 ($19,200 in interest paid).

      The P85D is $135,000.
      Stretch it to 144 months at a 3% and you get it for $1117 with a total interest paid of $26,000.

      WHO WANTS TO BE THE FIRST COMMENTER TO TELL ME MY IDEA IS STUPID AND WON’T WORK?

      Any takers?

      • 0 avatar
        Master Baiter

        I don’t think luxury car buyers want to be locked into a specific vehicle for 10 years. They’re also smart enough to do the math on the interest and realize it’s a bad deal.

        • 0 avatar
          darkwing

          But HELLCAT or something.

        • 0 avatar

          I’m trying to capture the money of the NOT-SMART who otherwise woulda wasted it on a Lexus or something.

        • 0 avatar
          TrailerTrash

          The recent stock loss/drop is NOT from the average Tesla owner or average stock holder selling. I say these drops are from more intelligent street investors and those managing investment products.

          Individual Tesla stock holders…????
          They might be smart enough not to get into an interest purchase loss, but they are stupid enough to buy into the Musk Tesla hustle.

          Of the 4 people I know who own a Tesla…they ALL have HUGE stock holdings.
          The buyer of a Tesla is a well off individual, with money to invest.
          So they invest heavily into a car/tech they believe is the future.

          They brag about their purchase, the future it represents and their invest/ownership in it…hoping they are correct.

          These are not your typical buy and sell everyday knucklehead investors. They buy with the extra money they have and sit…because they believe. If they didn’t believe in the nonsense of this hustler Musk, they wouldn’t have wasted all their money simply on huge torque and no driving distance.
          This is image and a dream.

          These are the very same idiot hypocrites that claim to be thinking of the environment yet use up a village of carbon foot prints on their vacations to Bali.

        • 0 avatar
          phlipski

          People buy plenty of boats on 10 and 15 year notes. Go to a boat show some time. You won’t find the MSRP. You’ll find the monthly payment and then in smaller print the terms – 180 monthes! And most people take their boat out less than 10 times a year. Why not stretch a Tesla out over 10 years?

      • 0 avatar
        nickoo

        It won’t work because no one is going to buy a tesla like a house. Its just a car and people aren’t that stupid. The model S is just a toy for the rich and those who seek status at any cost. The model 3 will be Tesla’s game changer, so they better get it right or they will perish.

      • 0 avatar
        Pch101

        YOUR IDEA IS STUPID AND IT WON’T WORK

      • 0 avatar
        CJinSD

        Inflation in the next decade will be exponential, so 3% loans aren’t going to make any creditors rich. People that buy Teslas trade every time a new model comes out, so they aren’t interested in long term loans anyway.

    • 0 avatar
      CJinSD

      If Tesla goes the distance, it will be because of government handouts combined with an ignorant and brainwashed populace that supports efforts to make things they have now luxuries for the few soon.

      • 0 avatar
        Pch101

        All of us were born crying like babies. Some of you never learned to stop.

      • 0 avatar
        SCE to AUX

        CJ, I’ll ask again for an explanation of these mythical government handouts you keep referring to.

        • 0 avatar
          dolorean

          What and ruin his myths and abject conjecture with facts??

        • 0 avatar
          CJinSD

          http://www.forbes.com/sites/patrickmichaels/2013/05/27/if-tesla-would-stop-selling-cars-wed-all-save-some-money/

          In California, we also get to spend an extra billion dollars a year on gasoline to fund fascism in the name of Cap(your freedom) and Trade(your prosperity).

          • 0 avatar
            SCE to AUX

            CJ, let’s discuss the points of your 2013 article:

            1. EV subsidies are across the board. I don’t agree with them, either, but Tesla gets no special treatment. Nissan’s buyers have reaped more than Tesla’s buyers. Then there are the other EV buyers also. This is NOT money in Tesla’s pocket; it goes to the consumer.

            2. Tesla’s loan from Goldman Sachs is a private transaction.

            3. Carbon credits are bought and sold between car mfrs, and none of them are forced to participate. This is not a Federal gift or subsidy. Until this year, Nissan led the way in carbon credits.

            Besides the predictable Forbes anti-EV slant in that old article, it offered no actual evidence of government handouts to the company.

            The Model S would sell just fine without the consumer subsidy, unlike the Leaf.

          • 0 avatar
            CJinSD

            1.) Tax credits to consumers for buying cars are a subsidy to the sellers, because they are getting paid more than market value for their cars as a result. Someone that pays $70K net for their car might not be willing to pay $81.5K for the same car, but that is what the seller is getting at the expense of taxpayers who don’t have $70K to spend on a car.

            3.) Carbon credits aren’t bought by manufacturers out of the goodness of their hearts. They buy them because the government makes them buy carbon credits in order to do business and the expense is passed on to people that buy the cars and trucks they need instead of government subsidized luxury vehicles. Even paying $25K for a car of limited utility is not a luxury available to most consumers.

    • 0 avatar
      alluster

      The genius of Elon Musk is not what he has done with Tesla but how he has convinced everyone…

      That he is an honest individual
      That he cares for the environment
      That he is trying to save the planet
      That he doesn’t care for the share price or never pumps the stock or is not in it for the money
      That he wants all auto manufacturers to build evs(Tesla will get slaughtered if one of the big boys take to EVs seriously)
      That Tesla makes a profit if not for continuous investment
      That Teslas are very reliable. (when almost 0 cars have hit 50K miles without needing a powertrain replacement)

      None of them are true in the slightest.

  • avatar
    LS1Fan

    Hate to be a naysayer, but 2020 is a ways off. If Tesla is burning cash now, what happens when -not if- another economic contraction happens?

    Another weakness-batteries are made up of several components .Should the supply of those metals and parts suffer a shock due to international politics, war, etc they’re also screwed.

    Elon Musk is no fool, but he is not God.

    • 0 avatar
      nickoo

      Lithium is extremely cheap and easily sourced…Large lithium mines in Nevada as well as South America. Not that it matters, there are just as good of battery tech out there that doesn’t even require lithium, it just happens to be in vouge. Nickel Zinc for example…

      The cost of a lithium ion battery is from using current static electrolyte which requires the need to deposit hundreds of layers of di-electric, cathode, and anode and squish the electrolyte in between them, each layer needs to dry out before depositing the next one. Manufacturing current lithium batteries is a terribly inefficient process and why they cost so much.

      Elon Musk will fail if he doesn’t have an ace up his sleeve, there is already better lithium (and other formulations) batteries out there, that are cheaper, just as good if not better, and much much much easier and faster to manufacture than what he’s using cutting non functional material by 80% and cost by half. Gel type electrode lithium batteries are already in testing and prototype manufacture stage.

      http://newsoffice.mit.edu/2015/manufacturing-lithium-ion-battery-half-cost-0623

  • avatar

    TESLA is killing my stock. I need them to hit $300/share so I can sell all.

    Everytime they fall down, they bounce back, but the volatility is terrible.

    THE TESLA MODEL S IS A TOY FOR THE RICH.
    THE TESLA MODEL X IS A TOY FOR THE RICH.

    The Model 3 is going to come so late that BMW and Mercedes will end up with better options available when it finally does come. Even Ford.

    The Model 3 is going to be between $50,000 and $70,000 fully equipped.

    Anyone who actually thinks they’ll be driving away with less than $40,000 doesn’t understand Musk’s smoke & mirros. This guy is the David Copperfield of the car game.

    • 0 avatar
      SCE to AUX

      I’m projecting $45-55k for the Model 3.

      A 70 is $75k, so I can’t see the Model 3 getting near that.

    • 0 avatar
      suspekt

      What I don’t get it,

      Why are the mainstream OEM’s allowing the P90D to smoke them? Why is there no credible mainstream rival?

      Seriously, the P90D WILL smoke 99.999% of cars in any real world setting. No one cares what happens after 130mph. In legal speed settings, non-car guys in their P90D’s are laughing at us “gear heads”. That notion is very very desirable.

      • 0 avatar
        Pch101

        “Why is there no credible mainstream rival?”

        Losing money on purpose isn’t usually a great idea.

        The reason that mainstream automakers don’t behave like Tesla should be evident every three months when Tesla issues its financial statements. Putting a big expensive battery in a low-volume car is a recipe for losses.

        • 0 avatar
          Power6

          I dont get it, is there that much price pressure on the luxury cars that Tesla sells? Couldnt they just hike the price 5k, or is that enough to dry sales right up? It seems to me they could charge a little more and not bleed so much cash on each unit without turning too many customers off. Doesnt seem like price competition woild be so intense at the 75k and up luxury car level. Clearly i must be missing something…

          • 0 avatar
            Pch101

            R&D is expensive. Tesla doesn’t sell enough cars to amortize its R&D costs.

            It also ends up underinvesting in R&D in order to reduce its losses. The need to manage costs by containing those costs likely contribute to the product delays that you hear so much about.

            Its sales overhead costs are also quite high — the direct sales model isn’t cheap. Tesla’s gross margins overstate its performance because it sells at retail and books that as margin (versus other automakers that are wholesaling most of their cars), but then Tesla loses it below the line in its exceptionally high sales costs.

            I doubt that price increases are feasible, otherwise they would have already been raised.

            The fact that you had to read this in an anonymous blog post and didn’t already see this in the financial media tells you how bad the media coverage truly is.

    • 0 avatar
      FreedMike

      “THE TESLA MODEL S IS A TOY FOR THE RICH.
      THE TESLA MODEL X IS A TOY FOR THE RICH.”

      So’s the Hellcat. Just saying.

  • avatar
    PeteRR

    They’ll make it up in volume.

  • avatar
    RideHeight

    Boom boom boom boom F/A Bb Bb/C F

    How how how how F/A Bb Bb/C F

  • avatar
    Master Baiter

    I’ve been saying they won’t make it from day one. If public sentiment moves in that direction, vehicle sales will drop further.

    • 0 avatar
      derekson

      Tesla’s real problem is going to come when the German marques and Lexus release fully electric vehicles and have full lines of plug-in hybrid options. The interior of the Tesla is about on par with a 1995 BMW in terms of luxury feel, and once the tech advantage is gone people will go back to buying Porsches, BMWs, Audis, and Mercedes. Add in the fact that the Model S is already due for a refresh and there’s none on the horizon (at least as far as I am aware, and I’m sure if there was a significant refresh coming we’d have heard about it already with how PR conscious Musk is).

      I also think the Model X already looks dated before being released since it uses the exact same styling cues as the Model S, though it will sell very well at launch until cars like the all-electric Audi Q6 come out and start stealing away Tesla’s customers. I think Tesla’s problem in the end (besides lack of profitability) will be their long development cycles, because their huge lead in luxury electric vehicles will be completely gone in another few years. As soon as it becomes viable to sell a car like the Model S for a profit, the Germans (plus maybe Lexus) will come in and do it better and eat up all the profits in the segment.

      • 0 avatar
        mcs

        The problem the germans have is that they havent established a charging network separate from their dealers. Dealer based charging is dependent on dealer hours and sometimes they want to ban owners of cars purchased from other dealers.

      • 0 avatar
        Pch101

        Tesla has proven what the auto industry already knew: EV’s lose money.

        Nobody wants to duplicate that result.

      • 0 avatar
        Spike_in_Brisbane

        “The interior of the Tesla is about on par with a 1995 BMW in terms of luxury feel”.
        So…….better than the new ones!!

        • 0 avatar
          dolorean

          Here in Regensberg, I’ve seen two Tesla taxis. Everytime one of them rolls by, the milling crowd stops and gawks slack-jawed like Jennifer Lawrence just lost her dress to the wind. It’s in very high demand as a taxi to the Plebians and the Germans I’ve spoken to that have disposable income find it a very appealing car and would buy one if they were available.

        • 0 avatar
          jkross22

          This is spot on, especially with the leather used on the seats.

  • avatar
    nickoo

    This is complete b s. Tesla makes a huge margin on their car sales and is only “losing” money because they are expanding as fast as they can, so they are spending more than they take in. They will be profitable sometime around 2020, as they have always stated as the plan. They can’t sell the model S forever and expect to stay relevent, they need to get the model 3 here as soon as possible if they are to be a real car company and not just a niche.

    Secondly, Tesla has a 750 million line of credit and used just over 100 million of that. They have no cash or funding issues at all.

    • 0 avatar
      TrailerTrash

      It is not BS.
      What major company is NOT investing and spending heavily on R&D? Every company has enough financial management to know budgeting and what amount is for R&D and growth.
      Nonsense.
      If you don’t…you die.
      The point is Tesla cannot do this and even as it tries it can’t handle the cash flow.

      • 0 avatar
        nickoo

        It IS B S. Tesla makes a profit on each car it sells, the biggest in the industry. They could easily expand much slower and turn a profit over-all if they wanted to–which would be a terrible business decision. Small companies in every industry take quarterly losses on paper when they are undergoing a major expansionary phase. It’s not a big deal, and they aren’t in any danger of running out of funds anytime soon. This article is complete B S!

        • 0 avatar
          derekson

          “It IS B S. Tesla makes a profit on each car it sells, the biggest in the industry”

          Care to provide a source for that claim?

          • 0 avatar
            Pch101

            “Care to provide a source for that claim?”

            Refer to the press release from the Department of Made-Up Statistics.

        • 0 avatar
          jkross22

          I don’t understand your logic. Unless you’re serving as the troll du jour, please point to the data source that shows Tesla makes more money per car produced than Porsche.

          • 0 avatar
            Pch101

            He’s confusing gross margin with profit.

            I’ve explained below why Tesla’s gross margins cannot be directly compared with Porsche or any other major automaker.

  • avatar
    jacob_coulter

    I can’t wait to see what happens if states and the federal government decide that subsidizing high end luxury cars is not in the best interest of the taxpayer. Or when big auto companies make their own electric vehicles and no longer buy these ridiculous mileage credits from Tesla.

    The whole company is built on smoke and mirrors and needs an aggressive army of bureaucrats and subsidies to keep them afloat.

    • 0 avatar
      stuki

      ” if states and the federal government decide that subsidizing high end luxury cars is not in the best interest of the taxpayer.”

      They have already decided that. Their concern is about what’s in the best interest of the tax feeder, after all.

    • 0 avatar
      hreardon

      As of right now – very little will happen. Tesla buyers are some of the wealthiest individuals in America. A few thousand dollars’ worth of tax credits isn’t really going to sway them one way or the other into a purchase.

      Norway has learned this lesson and is phasing out incentives for certain vehicles and income brackets as a result (as they should).

      Once you start talking $30 or $40k vehicles with incentives that’s a whole different kettle of fish – the incentives will help move metal.

  • avatar
    MRF 95 T-Bird

    If they are losing $4k per car it might be worth it for them to enter a partnership or licensing agreements with another automaker or tech firm.

    • 0 avatar
      APaGttH

      They did, it didnt take off. They had a partnership with Toyota and they produced electrified RAV-4s. Toyota ended up having to put massive incentives on the hood to lease them out.

      • 0 avatar
        MRF 95 T-Bird

        I remember the 1st gen RAV 4 Electric, but those were Toyota built. In fact I see a few around you can tell they are the electric version since they have vents in the rear quarters.

        The most recent version was cut last year.

        http://blog.caranddriver.com/unplugged-toyota-axing-rav4-ev-wont-renew-tesla-deal/

    • 0 avatar
      jkross22

      They’ve sold their powertrain to Mercedes for use in the B-class. Not exactly lighting up the sales charts, though.

  • avatar
    stuki

    It’s got to be the Mirai. As soon as it’s launched, Tesla stock collapses…..

    • 0 avatar
      mcs

      The Mirai is a slow motion train wreck. Not a lot of initial interest when compared with the initial interest in the Volt and Leaf. There’s also a problem with the hydrogen stations. After fueling only one or two cars, there’s a recovery time period upward of 20 minutes for re-pressurization before it can take another car. I’d hate to be fifth in line. There’s also a problem with station downtime.

      http://insideevs.com/initial-demand-toyota-mirai-us-good/

      • 0 avatar
        stuki

        Guess sarcasm doesn’t come across too clearly….

        Pch is doing a pretty good job of demonstrating problems with Teslas costs vs revenues. I can only imagine what Toyota’s hydrogen initiative would look like if broken out, and properly accounted for.

  • avatar
    wmba

    Tesla kind of burned its bridges behind it with Toyota. The Tesla motors supplied for the RAV4-E acted up earlier this year due to software issues, and then Musk opened his giant-sized mouth and dubbed fuel cells as fool-cells. Great way to make friends and influence people like Toyota who just brought out the Mirai – they should have paid Tesla to style it though, as it looks like the old Echo on crack.

    http://www.bloomberg.com/news/articles/2015-03-12/toyota-recalls-rav4-evs-to-repair-tesla-system-posing-crash-risk

    Tesla, they steal a name of a great engineer who in his later years turned into a wacko, rely on public subsidy to sell their vehicles at all, which are still extremely expensive so only higher income folk buy them and get the free public handouts, make a big fandango and erect a desert monument to make Li-On batteries to an obsolete form factor, and Musk wants to build a Mars spaceship at his other company. As a business plan, what part of this does not suck the big one in the long term, once the bloom is off the rose?

    Of course, bankers and stock speculators who wouldn’t know any science whatsoever or even recognize an Allen key, think it’s all wonderful. The stock price on a rational level is worth about $6.73, so now Tesla want to raise capital from more starry-eyed twits to prevent having to put the retail price up $4K. Borrowing capital for such purposes is the height of irrationality, so inevitably someone is going to lose their shirt on investment in this outfit. It will not be me.

  • avatar
    markf

    Headline should read “US Taxpayers lose $4000 each time Tesla sells a car”

    • 0 avatar
      SCE to AUX

      How do you figure?

      • 0 avatar
        markf

        Between the state/Fed tax credits and DOE loan subsidies and grants the American taxpayer has been taking it in the shorts with Tesla since day one.

        Why are taxpayers subsiding toys for wealthy folks? No one making 45K/year is buying a Tesla.

        • 0 avatar
          SCE to AUX

          Do you have these same concerns with Nissan, Ford, Kia, GM, VW, BMW, and Mitsubishi, all of whose buyers receive exactly the same subsidies?

          Or is there something special about Tesla?

          • 0 avatar
            markf

            Yes, I am against any gov handouts for buying their “preferred” cars

            Tesla is special because it makes no other cars than EVs and lobbied hard for handouts. It only exists because of Gov handouts. From the cars to the battery manufacturers they all owe their existence to me, the taxpayer, not me the consumer.

        • 0 avatar
          FreedMike

          “Why are taxpayers subsiding toys for wealthy folks?”

          Becaue this is new technology could revolutionize how we use energy in this country, which needs to happen from any number of standpoints, the environment being only one of them.

          And the early adopters of new tech are always the wealthy. They’re the ones who can afford it. Same with PC’s 35 years ago, which were also subsidized by tax incentives to wealthy people – let’s face it, who else could have laid out $10,000 or more at the time for a DOS machine?

          But plenty of them saw the potential, and bought the machines, alloiwng the manufacturer to amortize its’ costs. And then it could bring out far better machines at a lower price. This would have happened eventually without the tax incentives, but at a slower pace. As it was, the PC and the Internet (another technology developed with taxpayer funds) completely changed how people work, leading to the boom of the 2000s, which wasn’t a tech boom, but a productivity boom.

          Notice this isn’t far off from what Tesla is doing – there have been substantial improvements made to the Model S since it was introduced, and there’s the Model X coming down the pipe, which will be cheaper.

          This is how we ‘democratize’ new tech that’s important – rich folks buy it first, often with tax incentives, and then the price comes down where more and more consumers can afford it.

          At least we’re not subsidizing business owners to lease Escalades as “work trucks,” like we did a decade ago, right?

          • 0 avatar
            markf

            “Becaue this is new technology could revolutionize” There is nothing new or revolutionary about what Tesla is doing. Electric cars are 100 year old and 100 years ago they figured out electric cars are useless. They still are and they do nothing for the “environment” You just shift the carbon output from the engine to a power station somewhere. Not to mention the insane amount of energy used to manufacture batteries.

            “Same with PC’s 35 years ago, which were also subsidized by tax incentives to wealthy people” Show me proof the Feds offered tax credits for PC consumers. That is nonsense.

            “Internet (another technology developed with taxpayer funds)” Taxpayer funded Defense Research projects are not the same as the giving out tax credits for some product the Feds deem “worthy” Its the same with the mortgage write off, the Feds decided that home buyers get free money, renters get stiffed.

            “This is how we ‘democratize’ new tech that’s important ” It’s not new,it’s the same lousy idea wrapped in a new package…..

  • avatar
    Ryoku75

    I guess their fancy “Ludicrous” buttons just arent cutting it.

    They really need to make a more simple electric car, something that regular folk can buy. A Nissan Leaf but without the ugly body.

    • 0 avatar
      FreedMike

      Paradoxically, “normal” folks may want more from an electic car than rich folks would. After all, when you only have a certain amount to spend on a car, it has to do it all for you; someone who’s rich might be able to use the Tesla as a toy but have something else for more practical applications (trips to Home Depot, long trips, etc).

      This may explain why the Tesla outsells the Leaf. It also probably explains the appeal of crossovers to middle income buyers.

  • avatar

    As if Ford or GM never lost money on every car they made and they still around stronger then ever. If follow this logic Amazon should go bankrupt long time ago and where are established competitor of Amazon today? ULA is buying engine from Jeff’s Blue Origin – another company which should go bankrupt long time ago.

    • 0 avatar
      markf

      Well the difference is GM and Tesla all used taxpayer money to stay afloat, they should be out of business. GM an Ford both had other products making money to offset the lose. And Amazon is a public company that uses shareholders, not taxpayers money.

  • avatar
    SCE to AUX

    Since Tesla doesn’t expect to make money until 2020, let’s just rerun the same story in 2016, 2017, 2018, and 2019, with the same predictable comments.

    Otherwise, I’m not sure why this is news, except that someone took the losses and calculated them on a per-car basis to make it interesting.

  • avatar
    Jimal

    Could it be that the factory direct sales model is a part of the problem here? Retail is expensive when every part of it, including the costs of unsold inventory, sit on your books. I know everyone hates stealer ships, but perhaps this is the case that proves their value…

    • 0 avatar
      hreardon

      Yep – this is key to understanding the US auto industry. Look, the return on capital in the auto industry is around 4.8%. That’s horrible. It’s an industry with immense fixed costs, regulation and uncertainty.

      US automakers use the dealership network to help manage inventory and cash flow. They offload an immense cost center (and risk) to thousands of independent dealers, each one carrying millions of dollars in inventory, parts, equipment, etc.

      Not saying it shouldn’t be done, but uprooting this deeply entrenched financially symbiotic relationship would not be an easy undertaking.

  • avatar
    mfennell

    Is this just lazy reporting or deliberately misleading? I’m really not sure. Tesla’s automotive margin was 23.9% in Q2. They don’t “lose money on each car”, they actually make quite a lot. It took me less than 5 minutes to find the source information:

    http://files.shareholder.com/downloads/ABEA-4CW8X0/546418763x0x843991/DCDCCFDA-0709-405B-931A-B2F48A224CE8/Tesla_Q2_2015_Shareholder_Letter.pdf

    Whether the huge R&D is sustainable and whether they’ll ever make a real profit are legitimate questions but the headline is simply false.

    • 0 avatar
      Pch101

      I explained above why Tesla has inflated gross margins.

      You know why Musk is always touting Tesla’s gross margins? Because he knows quite well what I explained above, while most of the rest of you don’t.

      • 0 avatar
        mfennell

        Interesting point. They lump sales costs into “Selling, general and administrative”. 201MM! Still a tiny profit excluding R&D. Assume that includes stores, supercharger buildout, and every person not working R&D.

        The marginal cost of selling a car must be quite low though. How should they calculate gross per car if you don’t like the way they do it now?

        • 0 avatar
          Pch101

          The problem isn’t with the calculation itself, but with analysts missing what it means.

          Tesla’s gross margins simply cannot be compared to major automakers, because most of their revenues are wholesale while Tesla’s are entirely retail.

          It’s fine to know what the gross margins are, but failing to adjust for the differences when direct comparisons are made suggests that the average media analyst doesn’t know the basics of how to read a financial statement. You would think that someone would point this out so that readers aren’t duped by press releases, but apparently not.

          And R&D is not an optional cost. One reason that major automakers partner on some low-volume projects is to reduce the costs so that the project can be profitable. The high cost of R&D is one of the basic reasons why small independent automakers are unlikely to succeed.

          And Tesla spends too little on R&D, which means that the losses are lower than they should be. Tesla needs to conserve cash, so it defers its R&D costs, hence the ongoing product delays.

          If there was a smart analyst out there, then he or she would ask how the development of the replacement Model S is coming along, since a normal automaker would develop the replacement model just about as soon as a new model is released — it takes years to develop a car. But don’t expect anyone to ask.

          • 0 avatar
            mfennell

            All good points but when the media reports are “Tesla loses $4k/car!!!!”, I don’t hold much hope for a nuanced analysis. I’ll bet real investment institutions read the report as you do, they just don’t have any interest in writing for the public.

            Very good point about the Model S successor. I have a vague feeling that time to market *could* be lower for an EV because so much time is eaten up normally designing compliant powertrains but that’s just a hunch but, as you suggest, at this point the should have a design in the bag.

            All that said – I called the Roadster vaporware back in the day and now delivery of the Model S 100,000 is in sight (they don’t deliver in strict order but VINs > 100,000 have been assigned). Rational analysis does not always apply. :)

          • 0 avatar
            Pch101

            Yes, the media got it wrong. During the first half of 2015, Tesla generated EBIT of about ($273 million) on deliveries of about 22,000 units. So it actually lost about $12k per unit, not $4k.

  • avatar
    VenomV12

    Eh, anyone that understands finance at this level knows that losing money doesn’t always mean losing money. People like my parents really lose Teslas and at the right price I would even buy one once the issues I am concerned about are fixed. I’m also pretty sure my brother will buy one in the next year. I am slowly warming up to the company. I wish they would make electric mowers, I would buy one in a heartbeat and all my neighbors them also.

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