Tesla still burning cash: each car loses $4,000

Whatever its utility, Tesla's robo-charger video did one thing for the company: it distracted attention from the company's latest financial reports. Outlets like Reuters aren't impressed, with this report noting that Elon Musk's baby “burned US$359 million in cash last quarter in a bull market for luxury vehicles”. Tesla's …

[aurizon]

Expansionary cost, versus steady state cost

Tesla is spending on expansion and this added cost, when attributed across all the cars built, might be the reason for the $4000 they are supposedly losing on all cars. They are investing on a factory capable of a larger number of cars than whey they currently make.?

Depending on the granularity of the financial statements for recent years, this might be measurable on analysis.

[Orv]

Re: Expansionary cost, versus steady state cost

So they're losing money on each car, but they're hoping to make up for it in volume? ;)

[Anonymous Coward]

Re: Expansionary cost, versus steady state cost

They are investing on a factory capable of a larger number of cars than whey they currently make.?

There's two elements to Tesla's cost. The first is that the batteries are too expensive at the moment. This is what the gigafactory is about, building batteries in such high volume that the cost comes down. And that's why they have been so keen to sell the Powerwall - the original motivation was simply finding additional battery demand to support the gigafactory, and to thus help lower costs for the automotive application. I think that Tesla are now considering that power applications might be a better business model, due to far more possible sales in the domestic PV market.

The second element of Tesla's costs is volume related, and that bit is vehicle volumes. By industry standards, knocking out 12k vehicles a quarter is purely a cottage industry. Tesla can't survive on that. Growth is a problem because despite the vast subsidies that Tesla have had, and that buyers get (both explicit cash and avoided taxes), the vehicles are simply too expensive. If Tesla can't grow volume to reduce costs, then (a) they'll go bust because they'll never recoup the investments they've made, and (b) even if the assets are bought out of chapter 11 as a standalone business it will only become a niche maker with the sort of scale of Aston Martin or Maserati - but without the brand cachet and history.

I think Tesla is a grand venture; the product is impressive and innovative. As an ownership proposition it exploits a time limited opportunity where running costs are low purely because there's so few EVs on the road. If the owners had to pay taxes equivalent in value to those other vehicle owners do, the case for ownership becomes far less compelling. And as a commercial venture, Tesla is like many US tech stocks - wildly over-valued, paying no dividend and making no cash, hoping to sell out to Wall Street or another corporate buyer before the cash runs out. I'd guess a "merger" of Tesla automotive into a large automotive making group is an inevitability, with the main question being how quickly that occurs, and which set of shareholders do best out of the deal.

I suspect we'd all like Tesla to be the bold, pioneering upstart, that stuck it to the fuddy-duddies of the established motor makers. But at the moment their business is simply making subsidised green bling chariots for the very wealthy, and I can't see that ever morphing into the electric equivalent of Ford or Toyota.

[Michael Wojcik]

Re: Expansionary cost, versus steady state cost

I suspect we'd all like Tesla to be the bold, pioneering upstart, that stuck it to the fuddy-duddies of the established motor makers.

No, we don't all. I wish them well, in a vague not-wishing-ill-on-them sort of way; their employees need to eat too. But I'm not interested in their product, which doesn't address my needs (or desires) at all. And I'm certainly not endorsing some cloying, hackneyed Horatio-Alger mythology about a plucky rebel sticking it to the Establishment.

[ChrisInAStrangeLand]

Reg financial writers are talentless hacks

Tesla is pouring the foundations on a new multibillion dollar battery facility, building a global charger network from scratch, and two new mass market models for release in 2016 so of course they're spending money. You don't just divide quarterly cash flow by number of cars and "OMG $4K PER CAR LOSS".

[Anonymous Coward]

Re: Apparently Reg commentards are talentless tw*ts

You don't just divide quarterly cash flow by number of cars and "OMG $4K PER CAR LOSS".

That's quite true, and they didn't. This is (site relevant) re-reportage of Reuters coverage. And Reuters have done their sums right, and in your hurry to condemn the Reg journos, you haven't. If you divide quarterly cash burn by sales, you'd have a largely irrelevant number, but it's about $31k per car. The $4k per car reported is exactly the right number, of operating loss for the period divided by sales.

Moral of the story: Think before you post.

[Phil O'Sophical]

Re: Reg financial writers are talentless hacks

building a global charger network from scratch,

I can't help but wonder when governments around the world are going to decide that they've lost enough tax income, and start adding sufficient tax/fuel duty to the electricity supplied by these "free" chargers to bring the treasury income up to that from petrol/diesel. Tesla won't be able to absorb that.

[Anonymous Coward]

Re: Reg financial writers are talentless hacks

and start adding sufficient tax/fuel duty to the electricity supplied

They could, but a more likely route is "road pricing" using some complex, difficult to understand scheme whereby GPS tracking is used to monitor and record your movements, and you then get billed for your use of the roads according to the time of day. As a major side benefit for big state enthusiasts, Big Brother then knows where you've driven, when, and how fast. And by manipulating the pricing they can move traffic where they or their mates want it.

Do a search on the term "road pricing" and you'll see the extent to which the bureaucrats have this all thought through already. But by the time the peasants find that electric vehicles suddenly aren't cheap to use any more, it'll be too late.

[Tom 13]

Re: electric vehicles suddenly aren't cheap to use any more

What do you mean suddenly find? They aren't cheap NOW.

As far as the collections go, it's an obvious problem that is ignored by those who've argued for the subsidies. As more efficient cars of all types go up, revenues for maintaining the roads go down. They weren't in great shape 10 years ago and the situation has only gotten worse. Granted, much of the problem has been diverting money from road maintenance to other green boondoggles, but that's not going to change any time soon. Too many low info voters out there want their unicorn fart powered cars.

[Tom 13]

Re: Reg financial writers are talentless hacks

You don't just divide quarterly cash flow by number of cars and "OMG $4K PER CAR LOSS".

Actually, if you're not doing that you can quickly find yourself being the next Bear Stearns. It doesn't matter how much potential future earnings you have if you can't pay your current bills and no one will loan you money.

[Weapon]

Tesla actually has the highest gross profit of any US automaker. But rapid growth is not cheap. And Tesla takes that large gross profit and reinvests it into almost doubling in size every year.

I can just imagine how it was when Henry Ford started, I bet you media were going Henry Ford is losing X for every car he builds.

[Justin Clements]

Tesla has the highest gross profit? Do you just make this stuff up in your bedroom whilst fantasizing over Elon?

It's not like the numbers are private, a quick search shows that Ford have a $6n gross profit for the last quarter, vs Tesla with $260m.

[Vic]

I can just imagine how it was when Henry Ford started

You have a very interesting posting history. Is there perhaps something you'd like to disclose?

Vic.

[Griffo]

The Amazon Model

So Tesla are simply following a similar model to Amazon of investing all profits+ into building out capacity, and they get slammed for it. But Bezos can do it for 10 years and still get cheered? What's up?

[Captain DaFt]

Re: The Amazon Model

"So Tesla are simply following a similar model to Amazon of investing all profits+ into building out capacity, and they get slammed for it. But Bezos can do it for 10 years and still get cheered? What's up?"

But Amazon isn't forcing other automakers into looking at alternatives, nor frightening car dealerships by bypassing them.

A lot of big bucks are invested in status quo, and hate game changing.

[Tom Samplonius]

Re: The Amazon Model

" But Bezos can do it for 10 years and still get cheered? What's up?"

Because Amazon is also growing revenue by 15 to 20% per year. Fast growing company's lose money. Telsa hasn't got to the "fast growing" part yet. And it might not, since the product is niche oriented.

Telsa will probably fail as a company, but has helped a lot to make further improvements to the technology, and creating a path for someone else to follow. They are the Altavista of electric cars.

[quxinot]

Re: The Amazon Model

". Telsa hasn't got to the "fast growing" part yet. And it might not, since the product is crap."

FTFY. HTH.

[fandom]

Re: The Amazon Model

On the other hand, poor little car dealerships, who doesn't enjoy dealing with them?

[Michael Wojcik]

Re: The Amazon Model

But Bezos can do it for 10 years and still get cheered?

Plenty of people have been asking when, or if, Amazon will start making money. And I think those voices would be a lot louder if analysts didn't think the corpse of a failed Amazon would have some good pickings - someone who was interested in profits might pick up just AWS, say, and turn it into a healthy business.

[Parax]

Daimler

It's well know that the Mercedes electric B class uses the Tesla Motor drive train.

Likewise the Model S uses a lot of parts from Mercedes.

I'm not surprised Tesla's bank balance is going down have you seen the size of that gigafactory? Though I do think the Model X will not do as well as the S.. and Tesla need to get a move on with the Model ≡

[TeeCee]

So?

The ruddy things are already priced at "if you need to ask, you can't afford it" as a rich man's toy.

Stick the price up by 4k. Nobody who was actually going to buy one will care.

[ScottME]

Re: So?

Model S starts at around £50K - for a car that's comparable in size, performance and practicality with BMW 7-series, Mercedes S-class, Audi A8, etc. all of which fall in that price bracket. Move up the spec range and it's entirely competitive with high-end Jaguars, Aston Martin, Porsche, Maserati, etc. Model S was never meant to be a volume car, but I hear it's the best-seller in its class in some markets. Hardly a failure.

[Dapprman]

Re: So?

I've priced them up as there's a dealer round the corner from where I work and various colleagues of mine have gone for test drives. Sure they start at ~£50 but that's a rather basic car - like BMWs and Mercs of old, everything is extra. By the time you start adding sensible options (as opposed to luxuries and bling) your 50k is suddenly 85k+

[ScottME]

Re: So?

"everything is extra" - really? Here's some of the standard features:

17” capacitive touchscreen with digital instrument cluster

Onboard maps and navigation with free updates for 7 years

Automatic keyless entry

WiFi and Internet connectivity

Mobile app remote control

Automatic Xenon headlights

Retracting door handles

One touch power windows

High definition backup camera

Rain sensing automatic windshield wipers

Hands free talking with Bluetooth

Voice activated controls

AM, FM, and Internet streaming radio

Power folding, heated side mirrors with memory

Twelve way power adjustable, heated front seats with memory and driver profile

Apart from powertrain options, the "extras" are virtually all cosmetic things like metallic paint, alternative upholstery, fancier alloys, etc.

[sleepy]

Elon Musk's approach is that this is a change that has to happen, and lithium batteries are good enough, so let's go ahead and do it, and the problems will be solved somehow. I approve. Even if he does go bust.

0-60 in 2.8 seconds is about half the price with Tesla compared to other luxury brands. So the pricing is not completely out of line.

It's not that electric cars aren't viable, the problem is a very well established incumbent. Imagine if all petrol stations were deleted overnight. Petrol cars would probably do worse than electric are currently doing.

[ScottME]

You can't refuel your internal combustion engined vehicle at home - you can refuel an electric vehicle, albeit at lower rates. And you typically have many many hours available for that home refuelling, so how much of a problem is it really?

[Vic]

You can't refuel your internal combustion engined vehicle at home

I can. I own a jerry can.

you can refuel an electric vehicle

I can't. I have no off-street parking. I frequently can't even park in the same road as my house.

so how much of a problem is it really?

For me? It's pretty much insuperable. Which is a shame.

Vic.

[David Ndhlovu]

Quite simple where they are going wrong circa demand

I love the concept, impressed by the technology, astonished by the performance. Yet it looks like a slightly smarter Ford Focus.

They need to do some BMW i8 packaging. Literally make them look "electric".

Marketing means understanding what people want.

If i wanted a high performance machine, I'd slap myself thrice daily for buying a Ford Focus lookalike.

[werdsmith]

Re: Quite simple where they are going wrong circa demand

I know styling is subjective, but I see no Ford Focus in it.

I saw one in a car park near my office last week, it seemed about twice as big as a focus, longer and leaner.

[chr0m4t1c]

Re: Quite simple where they are going wrong circa demand

>Marketing means understanding what people want.

Model S currently outsells the i8 by more than 30 to 1, seems like they have a pretty good handle on what people want.

But that's a pointless comparison, the Model S is in the luxury saloon sector of the market, people generally aren't saying "Should I buy a 911 or Range Rover? They're about the same price".

Telsa have understandably gone for a conservative design for their first high-volume vehicles, when you're only offering one model you need it to appeal (or at least not repel) as many customers as possible. So far I've heard many comments that the car is too expensive, but I haven't heard anyone say they don't want one because of the way it looks.

[Federal]

Then there's the problem with their N0x emissions

Depending on where you recharge it, in the US, it emits on average 250% of the maximum allowable N0x per mile. And it can be 10 times that depending on how you drive and where you recharge it.

Sooner or later they'll get called on it. The VW cheating has everyone else's cheating being looked at.