By on May 17, 2019

tesla-model-3

Ten months. That’s how long Tesla’s CEO claims this month’s offering of $2.7 billion in stock and convertible notes bought the struggling automaker.

Hungry for cash to fuel new model development, a Shanghai Gigafactory, and an assembly line on which to build the upcoming Model Y crossover, Tesla has resorted to endless measures to trim costs, from moving to an online sales model and attempting to cull the bulk of its sales staff, to general staff reductions, to reducing build configurations. Vehicles prices seem to change by the week.

And still it’s not enough. To keep the automaker afloat, Musk told employees, the company will need to count every penny.

Thanks to an email seen by Reuters, we’re now aware of Tesla’s plan.

Claiming that the cash collected through the stock offering gives the company 10 months to reach a break-even point, Musk wrote, “That is why, going forward, all expenses of any kind anywhere in the word, including parts, salary, travel expenses, rent, literally every payment that leaves our bank account must (be) reviewed.”

The plan, Reuters notes, sounds an awful lot like last year’s plan, in which the company pored over its household budget with a fine-toothed comb in a bid to fund the ramp-up of Model 3 assembly, among other expenses. Its workforce contracted by 16 percent between last June and January of this year.

After a poor deliveries report for first-quarter 2019, Tesla followed up the bad news with an earnings report that showed a $702 million loss. That put an end to the company’s two-quarter streak of profitability.

Also this week, Tesla yet again made tweaks to its vehicle pricing. In the latest move, the company increased the price of all Model 3 variants by $400, including the $35,000 Standard Range model that briefly appeared on the company’s ordering site before disappearing into the ether. One must walk into a Tesla store or call in order to buy the base car (which, it should be noted, was hailed as an “everyman’s EV” during the Model 3’s 2016 launch).

You’ll now spend $35,400 on one, assuming the sales rep doesn’t strong arm you into a Standard Range Plus.

[Image: Tesla]

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68 Comments on “Tesla’s Stock Offering Bought It Limited Time, Email Shows...”


  • avatar
    SPPPP

    So up to now, some expenses were not reviewed? Doubt it.

    I would not like to be a supplier reading this email.

    • 0 avatar
      EGSE

      “I would not like to be a supplier reading this email.”

      Yep. One day at work I called Dell to get a quote on some PCs I needed. They told me the terms were COD only. That’s when I knew the finance dept had been lying to us about the health of the firm.

    • 0 avatar
      bullnuke

      My former employer, a large OEM coatings (paint systems) manufacturer, had Chrysler on COD back in the ’90s. No money, no honey. It was a pretty serious situation.

  • avatar
    Asdf

    Elon Musk is incompetent. Here’s a guy who’s run an automaker for a whopping 15 years, and he still hasn’t managed to deliver on the very basics, such as making a car that may be fully charged in a maximum of five minutes, with a range comparable to that of a diesel-powered car, while being competitive on price. These basic issues should have been sorted years ago, at the latest when the first Model S was launched. Perhaps then people would have bought his cars, and Tesla wouldn’t have been in the predicament it currently finds itself in.

    The reality is that Tesla won’t survive 2020, and will be lucky to survive 2019. When the bankruptcy is a reality it will be well deserved.

    • 0 avatar
      Tstag

      That’s not the issue. The cars are popular, it’s just Tesla doesn’t know how to make cars. They should buy some who does whilst they still can.

    • 0 avatar
      sirwired

      Hey, at least you didn’t call it a “defect” this time for Teslas not able to charge and hold more juice than current technology allows. (I’m not even sure the power grid itself could support superchargers any faster than they already are.)

  • avatar
    Tstag

    Dear Elon, use your market cap to buy JLR. You get people who know how to make cars, they get your tech and infrastructure. Both parties win both parties strip out huge costs from their businesses.

    • 0 avatar
      MoDo

      His “tech” is already open book and still nobody wants to touch it because those cars do not make money. They cost more to make than they sell for. Until that changes tesla is a dead car company walking and taking on another loser company would only sink it faster.

    • 0 avatar
      EGSE

      Their cash flow is too meager for the present burn rate. The low-hanging fruit for cost reduction for the cars in production has probably been picked. Freezing products in development, as painful as it might be, should be an option. They need increased revenue quickly and development/tooling up for products that don’t add to the bottom line ASAP will put them deeper in the hole they’re already in.

      To those who say “improve the work processes” or “design for manufacturing”, it costs money to do that and it can be a *lot* of money depending on the type and scope of the work and whatever disruption it causes on the manufacturing floor.

    • 0 avatar
      Rocket

      JLR knows how to make cars? You certain of that? Not only are they consistently at the bottom of virtually any quality ranking, but now they’re losing money, too. Ford gave Tata a huge head start, and they failed to take advantage of it. Besides, Tata says JLR is not for sale, and Tesla can’t afford them even if they were.

      • 0 avatar
        Tstag

        Bearing in mind Tesla struggled sort out the logistics of shipping cars to China and have resorted to put tents up to make cars then it’s clear that Tesla are struggling with the job of manufacturing the machines they make. By contrast Jaguar developed the IPace in super quick time and had full production in place very very quickly.

        Point is most car makers could teach Tesla how to manufacture cars. What Tesla have however is a charging infrastructure, excellent tech and a strong brand. A company like JLR could commercialise them properly without killing what’s good about Tesla.

        • 0 avatar
          mcs

          “Point is most car makers could teach Tesla how to manufacture cars. ”

          And who would that be? JLR? The car company most loved by towing company owners?

          Actually, rather than one of the big OEMs, they should have gone to one of the companies that specialize in contract manufacturing.

          The IPace is a crappy design and inefficient. Full production in place very very quickly? Really?:

          https://insideevs.com/news/338411/jaguar-delays-some-i-pace-deliveries-due-to-manufacturing-issues-prioritization/

        • 0 avatar
          Asdf

          Tesla’s charging infrastructure is hardly an asset, because the chargers are RIDICULOUSLY slow, and are nowhere near meeting even EXTREMELY MODEST requirements of fully charging vehicles in a maximum of five minutes. Tesla doesn’t have excellent tech, either, it’s mostly gimmicks superimposed onto IMMATURE and EXPENSIVE technology that’s far from being competitive with ICE-powered cars. And the Tesla brand must be severely tainted by now, with Elon Musk’s latest antics (including public drug abuse) as well as the fact that its vehicles are still DEFECTIVE BY DESIGN.

          So what does Tesla have that’s worth keeping or selling? Absolutely NOTHING. In a way it’s impressive that Elon Musk has burned so much cash over the last decade and a half, without anything to show for it. He could have flushed all the money down the toilet instead and the result wouldn’t have been much different from what it is now.

          • 0 avatar
            chris724

            “EXTREMELY MODEST requirements of fully charging vehicles in a maximum of five minutes”

            That’s not EXTREMELY MODEST. That’s extremely extreme. People who buy Teslas do not expect this, and it is not the cause of Tesla’s failure.

      • 0 avatar
        SaulTigh

        I was in Tulsa Hills yesterday and saw a Jag convertible pulled over with the hood up and a guy in a suit standing next to it on the curb talking on his phone. It couldn’t have been more than a couple years old judging by the looks of it. I told my wife, that’s got to hurt, given what he probably paid for it.

        That was as we rolled by in a 5 year old Ford pickup that has had exactly one minor issue since new. There’s something to be said for a reasonably competent manufacturer making a bazillion of something year in and year out.

    • 0 avatar
      Jagboi

      No, please don’t buy JLR – it would be the death knell of JLR.

  • avatar
    APaGttH

    I don’t see how anyone can be surprised by this. The cash situation is actually worse because over $650MM of that is deposits that can’t be touched until the vehicle the deposit is attached to moves to production and there is acceptance from the buyer. All that deposit cash isn’t just Model S, X, and 3 cash – we know there are semi trucks and other commercial deposit money in that pile.

    If you believe TSLA will have viable 4-season Level IV/V autonomy before they run out of cash, then you believe TSLA is a winner. Otherwise the inevitable is going to happen. You can’t sell product for a loss and make profit.

  • avatar
    stingray65

    In the 1950s there were rumors that Packard and Studebaker were having severe financial problems that caused a lot of potential buyers to go elsewhere for fear of owning an orphan vehicle, and suppliers to start demanding cash payment. Of course they didn’t have the leadership of Elon Musk or build solar panels, so …

    • 0 avatar

      One of the issues P/S had , and it sounds weird today, is P/S bought a lot of parts from outside suppliers. Where GM could just use Delco batteries and the cost per battery was the cost to make, P/S would have to buy those same batteries and a Delco would charge more and make a profit. And the same for a lots of other parts. Nowadays that’s standard procedure where you let someone else make parts to your specs.

      But, yeah, once the public and suppliers smell a rotting corpse things don’t get pretty.

      You mention solar panels

      https://www.bizjournals.com/sanjose/news/2019/05/15/tesla-solar-factory-cells-exports-tsla.html

      That’s currently not pretty either.

      • 0 avatar
        Steve S.

        That and the fact the Big Three could make better cars cheaper because they had more money for R&D and modern factories. In other words, they knew how to build cars and were good at it, and had the resources to do it.

        Tesla still hasn’t graduated from startup to mature company, and Musk is why.

    • 0 avatar
      SCE to AUX

      Tesla’s instability is only one reason why I didn’t buy the Model 3.

  • avatar
    aja8888

    It’s bad enough you can’t easily buy parts for these cars on a local basis. But if the company sinks, there will be NO future stream of parts and these thousands of expensive cars will just fade into the sunset. Make a nice yard planter maybe?

    • 0 avatar
      Cactuar

      About as useful as a Fisker Karma, yep.

      I really hope Tesla make it. I don’t care for Elon Musk’s style but the company does innovate and it’s an American company. When was the last time someone was impressed when you said you owned an American car? 1960’s Cadillac? I wish the best for Tesla and its employees.

  • avatar
    conundrum

    Well , it’s down to the “we have to get really, really real” time at Tesla. I hope Musk makes it, despite my criticisms in the past. He’s given it a damn good go, blinded perhaps by his super opinion of himself and his belief he knew more than them damn old car companies as to how to actually manufacture cars just because he regarded himself as brilliant beyond compare, which has been BS from the start. But it takes a madman to keep going through thick and thin, and I do have to applaud his tenacity, if not his methods.

    We shall see.

  • avatar

    Opel lost billion dollars every year this century and still it lives. And no one blames them for not knowing how to make cars.

    Well GM, Nissan and Chrysler went bankrupt and they supposedly knew how to make cars. And all three are still alive. Even SAAB is in zombified state refusing to die.

    • 0 avatar
      APaGttH

      Opel helped pull GM down and was part of GM in your above mentioned BK. GM jettisoned the brand the first chance they got. Nissan never went “bankrupt” per Japanese finance law as I understand it, but would have been bankrupt under US law in the late 90s. GM and Chrysler failures are well known, and they wouldn’t exist today without TARP and action taken by the Bush (43) Administration (no, Obama did not bail out the auto industry, the Obama Administration executed the Bush plan).

      The current administration would never bail TSLA out (Elon is a loser, shame, so sad, very sad, low energy actually, I wouldn’t go bankrupt if I ran Tesla, I could build them better and cheaper, yes, yes, I could). If TSLA can’t find profitability I doubt they go bankrupt – I would suspect they sell themselves to another automaker or get into a deep partnership with someone.

    • 0 avatar
      anomaly149

      A nonzero amount of Opel “losing money” (and Ford’s European division losing money) is that Opel would bear the platform engineering and development costs for a globally produced and sold Chevy.

  • avatar
    indi500fan

    If you watch the insider selling and executive turnover, it’s pretty obvious the ship is taking on water fast. But who knows what a post chapter 11 Tesla might look like without Musk and with some competent leadership?

    At the very least somebody (Taiwan?) is going to make a few bucks stamping repair panels for those Tesla 3s that are rusting like a 71 Vega after one winter of use.

    • 0 avatar
      APaGttH

      I suspect one of the automakers will buy them and that will become the exit plan. The Chinese would be extremely interested – list of potential buyers extend far beyond Toyota, Honda, GM, FCA, PSA, VAG, and FoMoCo. There is value in the customer base and the supercharger network – expand the platform to other vehicles where possible and you can meet ever-increasing fuel economy standards globally. Eventually retire the S, X and 3 (especially the over-engineered X) and move to a more scalable platform and pull from the existing parts bin…the technology lives on.

    • 0 avatar
      PandaBear

      Likely Softbank or Panasonic if bankrupt, and make it a battery companies, and sell the automaking part to others.

  • avatar
    CarnotCycle

    I recall predicting this exact thing about a year ago. Tesla burns up all its capital to make Model 3 promises and then raises more capital to toss on fire while Solar City turns from sideshow into balance sheet nightmare.

    Elon saving his cousin and the Model 3 were a bridge too far. They should’ve concentrated on debugging/improving their profitable Model S and the truck. Those are markets and volumes at a scale the company could handle.

    Now they’re making zillions of barely-profitable Model 3’s right when some big German fish are swimming into Tesla’s Model S profit-pond. They’re circling the bowl now. Last Elon-trick left I see is somehow getting liquidity via shenanigans with SpaceX.

  • avatar
    RRocket

    If you want to read a fabulous article about Tesla financials…..long but well, well worth the read.

    https://seekingalpha.com/article/4264912-tesla-pivots-oblivion

  • avatar
    ToddAtlasF1

    My first reaction to the inevitable collapse of Tesla was a little sadness. They and their proponents are the comic relief of the automotive industry, and it will be a more sober time when their demise is realized.

    Then I read an article about all the rent-seeking they engage in, soaking up the transfer payments created by the fascism of the Obama regime and the EU. Did you know they’re pooling their economy scores with Fiat in Europe in exchange for a fat payday? They’ve done so in the US with a number of makes to the tune of $5015 per Tesla sold. That’s money that came out of the pockets of buyers of cars they needed in order to buy expensive toys for the rich from Tesla. That’s all on top of the $7500 to $12,500 in taxpayer subsidies the rich get to help pay for the reduced usefulness of their Teslas. If Tesla can’t make a go of it with a large market of conventional vehicles to leach off of, what does this say for the true purpose of electrifying our fleet? I hope the villains behind EV mandates are taking advantage of the discounts they can get on Teslas. Sometimes they kill their drivers.

  • avatar

    Didn’t Preston Tucker find himself before the SEC for much, much less?

  • avatar
    etoenniesgmailcom

    After Tesla runs out of cash, how long until Apple steps in a buys Tesla for pocket change?

  • avatar
    Pch101

    Tesla’s problem is easy enough to understand: It can’t charge prices high enough to produce a profit or move enough units across which to amortize its overhead.

    It’s difficult enough to sell regular cars in low volume. The problem is compounded by the high cost of the battery.

    Musk is hoping that he fix this by monetizing autonomous driving technology, which is why he keeps touting it. But it isn’t ready for prime time and other OEMs are probably more inclined at this point to invent their own driverless systems.

    Tesla will be a good acquisition target in bankruptcy. It would be a good fit for BMW or Mercedes. The brand itself has value.

    • 0 avatar
      Scoutdude

      Before they actually put the so called $35k version on sale Musk admitted that it would cost them $38k to make such a vehicle. Now he wasn’t clear if that was the variable cost to build or if that included retailing overhead and amortization that undoubtedly would have been based on their overly optimistic sales projections that aren’t panning out.

      The other question is if that includes the value of the ZEV credit each vehicle generates. Chrysler is a happy buyer of those credits and they are one of the bright spots on Tesla’s balance sheet.

      Chances are based on Musk’s versions of other things that the number was based on the variable cost to build minus the value of the ZEV credit, and totally disregarding the overhead and amortization of development and tooling.

    • 0 avatar
      mcs

      Starlink and it’s rumored military version could very well keep Tesla alive. It will probably push SpaceX’s value up given its income potential. With SpaceX worth more, Musk could give up part of it to raise cash to keep Tesla alive. The other scenario is that the Starlink income could give Musk enough personal cash flow to do the same thing. They are saying the civilian version could bring in 50 billion a year by 2027 with profitability much sooner (I forget the date). I think the military version is just a whisper at this point, but I think it will happen. Much harder for Chinese killer satellites to take out. If they did, you could potentially repopulate the constellation with spares in minutes with a quick launch.

      Depending on what happens with Starlink, Tesla will stay around and potentially never need to make a profit. He’ll keep it going no matter what it takes.

      The Maxwell acquisition will have a big impact if they can get it into production and if it really saves money. The 500 Wh/kg density will lighten the cars and they can use a lower capacity battery to deliver a given range. A lower capacity battery can mean lower costs depending on the price of the technology.

      https://spacenews.com/air-force-laying-groundwork-for-future-military-use-of-commercial-megaconstellations/

      One thing I would like to see Tesla do is license that motor technology they have to companies that make smaller motors for robotics. Those motors are super efficient and we’d love to get out hands on smaller versions. Royalties from small motors could give them some much-needed income for little investment.

    • 0 avatar
      Joe Enrico

      “Tesla’s problem is it can’t charge prices high enough to produce a profit or move enough units across which to amortize its overhead. It’s difficult to make money while trying to sell cars in low volume”

      agreed, that is the answer in a nutshell

  • avatar
    gasser

    Cash flow problems?
    1.Stop selling Model 3 that are base, unless buyer had a previous deposit.
    2. If the pictures of unsold Model 3s filling parking lots in Northern California are real, move that iron out! Short term $2000 rebate??? Free upgrades of something or other?? Free service??? Free Level 2 home chargers?? Sell them with NO MONEY DOWN. If the car is already built, its a sunk cost. At least start getting some cash flow.
    3. Find a foolish bank to provide leases with unrealistic buy backs, so the monthly can be ridiculously low.
    4. Sell batteries to those European manufacturers who can’t get new EVs out the door because of production delays. Even if they are your competition, Tesla needs to survive to compete.

    • 0 avatar
      Scoutdude

      1. They are trying to limit the sales of the base model, have it be a “off-menu” item. The problem is that the people who haven’t already bought one are the people who wanted that base model.
      2. On the other hand they really can’t afford to sell them at an even bigger loss.
      3. Well they have recently started leasing to move that metal.
      4. They don’t have the cash to expand the plant to make more batteries.

    • 0 avatar
      HotPotato

      These seem like good ideas.

      They’ve already pretty much done #1. From what I’ve heard the cars in #2 are mostly just awaiting export. #3 sounds good, just needs a suitable bank to step up.

      But with #4 I think you’re really on to something. Panasonic controls the battery side of the factory and they’re having serious problems meeting production targets — but have also stated that they’re not planning to invest more money at this time, at least until they can get their existing employees and equipment to produce the target quantities. So all the batteries that should be going into Powerwalls are having to be diverted to cars. This costs Tesla market share in energy storage. And it means Tesla’s potential auto production capacity is constrained by battery supply.

  • avatar
    JoDa

    Tesla should make a profit in China…there are 1.4B people with a totalitarian government gun to their heads to buy EVs.

  • avatar

    While we enjoy slagging all and sundry here, we must admit that the majors aren’t totally stupid. The majors won’t touch self driving because they know it isn’t ready yet. Likewise, electric cars are usually sold as a loss/niche market by the majors…not because of conspiracy theory, but because they too aren’t ready for the vast majority of use cases. There needs to be a law (Norway, a few other places) requiring them, OR a vanity case, like all the tesla I see in my area. No one has cracked the five minute charge, or a way to make the batteries cheaper. I hope Tesla doesn’t go under, but history has shown a first adopter often does, only to have the tech/concept do well later. You don’t think GM, Ford, etc has tried to build a $35k electric ? Closest GM came was the Bolt, which for $40k gets you a $20k car with a battery.

    • 0 avatar
      mcs

      “No one has cracked the five minute charge, or a way to make the batteries cheaper.”

      You’re wrong.

      For many of us, we have 0-minute charges. Unattended fueling is a different beast than charging where you have to stand next to the vehicle. Time is critical when you have to stand next to the vehicle in the cold. When you can do other activities while the car charges, you can accomplish tasks that you’d have to do anyway while the vehicle charges. The other day, I had to stop for a twelve-minute quick charge. Instead of getting home 12 minutes sooner and reading and responding to emails, I performed the email tasks while at the charging station. So, I effectively lost zero time for fueling.

      Another example is when a friend of mine and I go to a remote work location. I fuel while we work. He has to make a stop at the gas station outside the facility. I wave and honk as I drive by. See ya later. So who has the shorter fueling time in that case?

      You’re also dead wrong about battery cost reduction. Way off on that one. Advances in materials and even lithium processing are happening on a regular basis and the technology being used in manufacturing today. Densities are increasing at a steady pace. CATL is already at 300 Wh/kg (compared to around 150 Wh/kg in the original Leaf) and moving beyond. Higher density means lighter weight which means less material. Tesla isn’t far behind CATL. The Chinese just made a huge breakthrough in reducing lithium processing costs.

    • 0 avatar
      SCE to AUX

      The majors are pouring billions into self driving. They’re all crazy.

      • 0 avatar
        mcs

        Pouring money into autonomous research isn’t necessarily bad, but most of them are moving down many wrongs paths of development. It’s not just the LIDAR false trail (and more and more scientists are coming out against it with Levandowski the most recent), but the AI technology they are using has some flaws that they are ignoring. Of course, as anyone with half a brain knows they have some horribly unrealistic time tables.

        That being said, I’d totally trust a recent Tesla in heavy stop and go traffic. At least if the thing has the urge to mate with a Walmart truck I’d have time to duck. I think current technology is fine for that.

        Ultimately, I think we’ll have autonomy systems better than any human. There needs to be a lot of research and work in both AI technology and sensors to get us there. Technology that allows an autonomous car to see around corners through refections and interpret moving shadows will give the machines an advantage over humans. AI technology that can make use of it is needed too.

  • avatar
    TimK

    The end will come when they can’t make payroll. CFOs hate that kind of crap, so I expect a buyout/merger will be announced by the end of the year.

    • 0 avatar
      ToddAtlasF1

      I suspect Tesla will need to go through bankruptcy before anyone will touch them. Why buy or merge when their debts are about to wipe them out, they still contain the SolarCity poison pill, and they are facing liabilities for customer deaths and raging infernos? It would be better to buy some of their assets by assuming some of their debts when their creditors are feeling desperate.

  • avatar
    JoDa

    Elon Musk misjudged his evangelical Tesla followers. He could have easily sucked another $10K out of their wallets. The Church of Tesla is right up there with Apple and Starbucks.

  • avatar
    lastwgn

    When does the Tesla Deathwatch begin? It would appear to be overdue. With an added bonus question: Will Tesla’s death crater the entire EV market along with it?

    • 0 avatar
      28-Cars-Later

      “Will Tesla’s death crater the entire EV market along with it?”

      Talk amongst yourselves.

    • 0 avatar
      SCE to AUX

      “Will Tesla’s death crater the entire EV market along with it?”

      That’s an excellent question.

      For starters, I don’t think Tesla will die, but they are likely to take on a new form, driven by their Board of Directors. They definitely need to jettison Mr Musk. Tesla fits the ‘too big to fail’ image.

      But since you asked, a failed Tesla would be like the fall of Rome, followed by the Dark Ages of electric vehicles. VW could emerge as the new leader, but really nobody has a cohesive plan for EVs as Tesla has been pursuing. Similarly, it would be interesting to see how government policies evolve in terms of quotas and subsidies.

  • avatar
    SuperCarEnthusiast

    The Chinese government is licking it’s chops! The had such a great time with Volvo and think what they could do with Tesla with pretty much unlimited funding to really build up Tesla! LOL!

  • avatar
    incautious

    8000 cordless drill batteries auto crash and a dope smoking Druggie CEO. I pass.


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