Report: Tesla Losing $4,000 on Each Car, and is Burning Cash Faster

Aaron Cole
by Aaron Cole

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.

Aaron Cole
Aaron Cole

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  • SCE to AUX SCE to AUX on Aug 09, 2015

    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.

    • Master Baiter Master Baiter on Aug 09, 2015

      Well, a year from now, Tesla might decide they won't make money until 2025. So the story is likely to change every quarter.

  • Jimal Jimal on Aug 10, 2015

    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...

    • Hreardon Hreardon on Aug 10, 2015

      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.

  • Mfennell Mfennell on Aug 10, 2015

    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: 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.

    • See 4 previous
    • Pch101 Pch101 on Aug 10, 2015

      @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.

  • VenomV12 VenomV12 on Aug 10, 2015

    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.