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There's nothing really new there. Most people have been saying that for a while, and I don't know anyone who was actually persuaded by that $19,000 loss per car. I saw it mimicked by some talking heads, but that's about it.

There is still a question about the true valuation of TSLA shares because, even though they are making a profit on each car, they are spending their incoming cash flow every bit as quickly as it comes in. Sure, they are building their business infrastructure, but those are scary numbers for investors. How Tesla shares are priced at six times what GM shares are priced at boggles my mind.
 

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Discussion Starter #4

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To build out the factories to meet the demand? Yes. That's just normal business. It's a great problem to have, and they should have no problem raising the capital.
But the concern is that despite making $20,000 profit per car, having share prices over $200 each, and receiving $400 million in donations, Tesla still needs more money.
 

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To build out the factories to meet the demand? Yes. That's just normal business. It's a great problem to have, and they should have no problem raising the capital.
Did you actually read the article?

[one of two things is bound to happen here:

Tesla will issue equity, and $2 billion seems the bare minimum as TSLA is likely to burn as much within one year.
Tesla will face significant failure risk within one year if it doesn't issue that equity.

Conclusion

My main conclusion of this whole drama is that Tesla is a company on the verge of bankruptcy, whose only salvation is to issue a large slug of equity within the next 3-6 months. I predict Tesla is likely to issue equity within three months.

Moreover, this large slug will only be enough to keep Tesla afloat for 1-2 years more (depending on whether the equity raise is $2-4 billion). And this equity raise will do nothing to assure that the Model 3 will in any way be profitable. So in 1-2 years' time, Tesla is likely to be in the exact same spot as today even if it issues equity. I predict Tesla will issue at least $2 billion in equity, which is the bare minimum.

If Tesla does NOT issue a lot of equity, it will fail quickly (within one year).]

It could be a very interesting time ahead...:rolleyes:

Especially since the above analyst is not alone in his thinking...

Most analysts expressed more concern than optimism in terms of the company’s brewing cash crunch, but Bank of America’s John Murphy may have summed up the opinions best:

“Given ongoing manufacturing issues and delayed ramp of the Model X, we question whether (i) this target is actually achievable, and (ii) can be done so without a significant capital raise in the near future…By our estimates, TSLA will burn roughly $(1.6)bn in cash in FY16 (includes Model 3 deposits), with no real relief in sight…TSLA has raised capital every year since 2010, and we believe if the company fails to turn the corner on free cash burn in the near term, which we view as unlikely, support for the stock may dissipate…[We] do not expect the company to be free cash positive on an annual basis in at least the next three years.”

The magic number is still unclear, but selling $2 billion worth of Tesla stock doesn’t seem like an out-of-line possibility. In fact, don’t be shocked if it’s even more than that, as the company tends to underestimate costs and the amount of time required to make production progress.

I liked the one analyst's statement...buy the car, not the stock...:)
 

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Did you actually read the article?

[one of two things is bound to happen here:

Tesla will issue equity, and $2 billion seems the bare minimum as TSLA is likely to burn as much within one year.
Tesla will face significant failure risk within one year if it doesn't issue that equity.

Conclusion

My main conclusion of this whole drama is that Tesla is a company on the verge of bankruptcy, whose only salvation is to issue a large slug of equity within the next 3-6 months. I predict Tesla is likely to issue equity within three months.

Moreover, this large slug will only be enough to keep Tesla afloat for 1-2 years more (depending on whether the equity raise is $2-4 billion). And this equity raise will do nothing to assure that the Model 3 will in any way be profitable. So in 1-2 years' time, Tesla is likely to be in the exact same spot as today even if it issues equity. I predict Tesla will issue at least $2 billion in equity, which is the bare minimum.

If Tesla does NOT issue a lot of equity, it will fail quickly (within one year).]

It could be a very interesting time ahead...:rolleyes:

Especially since the above analyst is not alone in his thinking...

Most analysts expressed more concern than optimism in terms of the company’s brewing cash crunch, but Bank of America’s John Murphy may have summed up the opinions best:

“Given ongoing manufacturing issues and delayed ramp of the Model X, we question whether (i) this target is actually achievable, and (ii) can be done so without a significant capital raise in the near future…By our estimates, TSLA will burn roughly $(1.6)bn in cash in FY16 (includes Model 3 deposits), with no real relief in sight…TSLA has raised capital every year since 2010, and we believe if the company fails to turn the corner on free cash burn in the near term, which we view as unlikely, support for the stock may dissipate…[We] do not expect the company to be free cash positive on an annual basis in at least the next three years.”

The magic number is still unclear, but selling $2 billion worth of Tesla stock doesn’t seem like an out-of-line possibility. In fact, don’t be shocked if it’s even more than that, as the company tends to underestimate costs and the amount of time required to make production progress.

I liked the one analyst's statement...buy the car, not the stock...:)
You do understand that once the first model 3 comes off the assembly line with a lot more to follow quickly along with the first battery pack out of the Gigafactory that the expenditures will drop off considerably? With just an 80% conversion rate on the cheapest model 3 they are looking at 10.5 Billion in income. With most people opting for a couple pieces of trim above stock you are looking at 12.6 Billion in income. Now if everyone converts their reservations to orders which is unlikely but more people will order as production ramps up so with 400,000 current reservations Tesla will bring in 16.8 Billion in revenue just on the current orders for the model 3. This doesn't include the Model X or the S or the Batteries that the Gigafactory will sell.

If they can ramp up to even half of what they want to in 2018 they will take in around 8.4 Billion on model 3 orders alone. It is always hardest and the analysts are always gawking when you have no product to sell but have a ton of cash going out but unlike what the analyst in your quote said there is relief in sight and Tesla will have no problem raising any funds necessary to make the transition from build up to production.

Anyone that thinks someone who has launched rockets to the ISS and landed them back on a floating barge while getting a record number of pre orders for a car that isn't out for another year and a half wouldn't be able to raise a couple Billion dollars is delusional at best.

Don't forget Elon is worth about 13 Billion alone. Do you really think he would let his baby go into bankruptcy over a couple Billion when the finish line is so close?
 

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I've been tracking Tesla from it's inception. Musk is ridiculously optimistic about the goal line, but, his success factors are also wildly in the green. Wildcard is a mild description.

The powerwall and powerpack thing may yield more profit than the cars! People are tired of having only one choice (gasoline and grid) for their energy needs. Now we have PV and batteries to power our cars and homes. The revolution will be awesome and devastating for the likes of Exxon and PG&E. Car manufacturers that fail the energy switch will be replaced.

Musk for POTUS!
 

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The article in the Seeking Alpha is silly, regardless of the position the author is taking. Stock gamblers drive me nuts. I doubt they are smart enough about business to run a lemonade stand. They certainly are not at HS level.

You need to work fixed, capital, and developmental costs into unit sales.

THat's how you set your base price, be it a manufacturing business or a service sector business. You can charge more, but you should avoid charging less than your base as it means you're paying your customers, which is backwards.

In my case, I'm a service sector business, and I use a formula that is about 40% direct labor, 30% overhead, 20% cost of capital equipment, and 10% profit. There is no real cost of materials, but you could think of the labor as cost of materials.

I cannot ignore overhead or cost of capital to set my hourly quoting rate. But let's say I need an expensive machine that I cannot fully utilize yet. I have to divide it's costs over more years when doing my calculations. But it STILL costs me money. If my capital and overhead go higher than the targets by more than the 10% of profit, I go broke. But that's not how ratios work. You reduce staffing instead to get your workable ratios back. Where do the ratios come from? First math, then trial and error to adjust them.

Whether Tesla can survive is anybody's guess, but it is certainly not a sure thing. Especially since whatever their ratios are, they are wrong and need adjusting, or they would not be bleeding cash so fast.

How much they lose on each car is information you're not going to find outside. But yes, they are are losing money on each car. Not only are they not making a profit at all, whatever cash the sales of cars creates is being spent making cars. When your volume goes up, but your profit does not (ratio falls), you are losing money on each car.

If Tesla doubled production tomorrow, they would fold.
 

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The #1 reason for having faith in the Tesla Motors business model is that it's tied into government activities like SpaceX is.

The government wants to spend money on EVs and space, and they are probably going to assist all companies working in these fields.

Government related work can be very profitable, but it is risky.

Most businesses only take on a certain percentage of government related work to avoid collapse in times of budget cuts. In fact, if you are sub-tier, part of your evaluation criteria as a vendor is how much a % is gov related.
 

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You do understand that once the first model 3 comes off the assembly line with a lot more to follow quickly along with the first battery pack out of the Gigafactory that the expenditures will drop off considerably?
This is not true. The automotive industry is about constant re-investment.

What comes after the Model 3? What is Tesla doing for the next generation Model S or Model X or Roadster? What is Tesla doing to take advantages in changes in battery technology? What is Tesla doing to keep pace with evolving manufacturing techniques? And the supercharger stations are going to need to exponentially grow. Old ones will need maintenance. And then when charging technology evolves Tesla will need to rip them out and replace them all. What is Tesla going to do when the rest of the auto industry moves on to 200KW charging in the next decade?

Traditional auto manufacturers when they finish one project they immediately start investing billions in the next generation. It's common for automotive manufacturing to spend billions to tear out assembly lines a replace them every several years to take advantage of new technology and processes.

The automotive industry is a never ending capitol intensive industry. The investments will never end and they will not reduce in cost. If Tesla pulls back it's investments it will be left in the dust.

Of note the automotive companies that make the highest margins are the low volume higher end car makers. If Tesla is having trouble making ends meet with low volume high end cars. Then I have serious concerns about their future.

There is a reason GM and Toyota pulled out of the Fremont factory. They couldn't produce a business case to keep it viable.
 

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Not to spend too much time wearing a black hat, but the main concern I have for Tesla is that EVERYTHING hinges on the Gigafactory. All of the expectations, guidance, plans, etc. are predicated on a successful opening of the Gigafactory. One misstep, and all of these plans come crumbling down.

Again, I don't have enough vision into their internal operations to know how likely a successful launch of the Gigafactory will be, but from the outside looking in, a failure in the Gigafactory is the biggest threat to success for Tesla. Many people here assume that the Gigafactory will be opened and producing quality packs efficiently, but to me, that is a huge assumption. You are, as the adage says, counting chicks based on the number of eggs you are about to purchase.
 

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Of note the automotive companies that make the highest margins are the low volume higher end car makers. If Tesla is having trouble making ends meet with low volume high end cars. Then I have serious concerns about their future.
Exactly. I've mentioned before that Tesla should stay in the high end part of the business where people will pay high end prices. Tesla might have even priced a couple of models much higher than they did. The $30k and down market is going to be different. Production is a long way off, and they will be competing with other mfg dealers who have price cutting sales at end-of-month, end-of-quarter, end-of-year, endless rebates, etc., etc., and within acceptable performance stats, these buyers will be looking hard at prices not ludicrous 0 to 60 times.
 

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The quarterly corporate earnings conference calls can give you a feel for just how healthy a company is. Transcripts of these calls are available online.

Compare the latest Q1 conference call by Tesla with the one by GM. Which one sounds like they are on a successful track, with sound financing and realistic, predictable scheduling, and which one sounds like the company and management is in chronic crisis mode? It can be especially interesting to go back and review several quarterly earnings conference calls and compare what management said would happen in the next quarter/year with what actually happened.

These transcripts are long and can be tedious, but if you really want to know, you have to dig deep. The investment advisors on the calls ask very pointed questions to top management - none are fan boys of either company, just fan boys of making good investments.

GM Q1 conference call

Tesla Q1 conference call
 

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Uhm, to increase sales volume close to 10x!
Stock prices have little to do with labor, capital, or profits.

If you cannot make money selling $100k cars, it will not get any easier selling $40k cars.

Elon Musk needs to get his ratios right. You have target ratios for labor, materials, capital, fixed, R&D, and profit.

Right now, as Tesla Motors production quantities rise, losses rise also. This means your ratios are not working. The fact the profit ratio is less than 0% is not as important as the fact that the rest of the ratios are not working.

It's OK to lose money if production increases reduce the losses. If you increase production and the losses increase also, you have a very serious issue that needs to be corrected instantly.
 

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So they are quoting a $190 per kWh. I'm curious how they hope to be price competitive with GM's offerings, if the Bolt battery pack is costing GM $145 per kWh.
GM's cost is not $145/kWh for the pack. It has a quoted $145/kWh price for the cells.
The $190 cost for Tesla is for the pack price, and is the current costs. Once the gigafactory is up and running Tesla's cost will drop even more.

GM may well have a lower pack price than Tesla, or it may be higher. I doubt it will be too different one way or the other.

Here is some discussion of the various numbers: http://www.greencarreports.com/news/1103667_electric-car-battery-costs-tesla-190-per-kwh-for-pack-gm-145-for-cells?fbad

The Bolt's biggest advantage is it will be on the roads a year before the Model 3.
 

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The Bolt's biggest advantage is it will be on the roads a year before the Model 3.
And it's a CUV with the interior size of a mid-sized car. That's a big draw for me. I don't need or want another sedan.
 
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