From WSJ: Tesla asking suppliers for refund/cash to become profitable

[roblab]

If you're worried, that's what you should do. Wait a while and see how things turn out. You can order the car whenever you decide you want it.

Ah, but then you have to wait for them to build it. Unlike GM, who build tens of thousands of cars to sit on lots across the country, Tesla builds most cars when you order them, unless they have a demo somewhere that matches your order. Ask people who ordered a Model 3 months ago.

No one has lost any deposit. He won't lose his.

 

[dw4ngg]

What you call "cash burn" refers to an innovative young company investing much of its revenues into exponential growth as it disrupts long established capital intensive industries. It could stop investing in growth right now, and instead pay dividends like GM does. In that case its share price would likely deflate considerably.

AviP’s life is a cash burn

 

[FirebirdAlpha]

It's really frustrating having my posts moderated... No one has laid out the simple bear case for the Wall St Journal memo, and I think someone needs to.

Please consider that Tesla may be having liquidity problems:

• At the end of Q1, Tesla had an equivalent of $882.5 million overseas (see "Liquidity and Capital Resources" in 10Q), $985M in customer deposits, and $798M in other cash sources.
• At the end of Q1, Tesla had -2.2B net working capital.
• At the end of Q1, Tesla's cash (2.67B) cleared accounts payable (2.6B) by 70M.
• At the end of Q1, Tesla stated that they had an additional 2.35B in planned CapEx this year.
• Given that Tesla has planned CapEx spend, we would expect cash to go down and PP&E to go up, thus further straining net working capital.
• Tesla ended last quarter with a large amount of inventory. According to the TMC spreadsheet, that inventory has not yet been liquidated. Deliveries haven't caught up to production.
• This is why the Lathrop field is so concerning. 2500 cars were sitting in the desert all weekend.
• The US Dollar significantly strengthened this quarter, which could further strain working capital. USD/EUR went from .813 to .851 (gain of 4.67%). USD/CNY went from 6.28 to 6.76 (gain of 7.64%).
  
• At this point, you would expect cash to be well below payables
  • luvb2b's great thread estimates cash at 1.9B, payables at 3.6B, and net working capital at -2.75B...
  • Also estimates -750M in cash.

They're in the middle of a liquidity crisis. Is that really so unfathomable?

Do the exercise: at what level of working capital would you expect Tesla to become insolvent? Is it 50% of revenue? 75%? 100%?

And yes, I'm calling Elon Musk a liar. He lied last summer when he said they could reach 20,000 Model 3 cars per month in December. He lied tonight when he said they were delivering ~6000 per week.

I think Tesla is being deceptive when they call the Lathrop lot a "distribution center" - they don't address the root question of why more cars aren't moving on/off the lot, especially given their business model that each car is made to the configuration of the buyer.

I think Tesla is being deceptive when in their response to the WSJ memo - they don't address the most vital nugget of the piece, which is the concerning cash position ("necessary for continued operations" quote).

The problem Tesla currently faces is that they tried to instantly ramp from 1550 Model 3s/week (on average) to 5000 Model 3s/week (on average). That's a huge jump.

And their cash position doesn't afford them errors like this anymore. They have payments due to suppliers, and Tesla can't sustain operations at current prices.

 

[dondy]

But does GM have a cash burn issue. That's the difference between Tesla and GM.

P.S. I'm not short or long TSLA. Used to be a long investor a loooong time ago.

GM were bankrupt, remember?
GM debt is restructured,but their debt to equity ratio is still worse than Tesla. GM was "burning" cash in 2017.
On what planet are you living on?

 

[Boomer19]

GM were bankrupt, remember?
GM debt is restructured,but their debt to equity ratio is still worse than Tesla. GM was "burning" cash in 2017.
On what planet are you living on?

@AviP i think what everyone’s trying to say is,
don’t believe the nonsense. tesla isn’t going anywhere despite waves of attempts to make them fail. If you want the car, get the car. 100s of 1000s of us are. i know numerous tesla owners who will NEVER go back to another ICE vehicle

 

[Hitman007]

25% cancellation rate on M3. But maybe that is fake news as well

 

[Mario Kadastik]

25% cancellation rate on M3. But maybe that is fake news as well

Would be useful with a source link that is trustworthy. And while i highly doubt it's actually 25% cancellations (my own guess would be capped at around 10%-15% max) a substantial part is probably people upshopping to CPO/loaner or what not Teslas. In those cases Tesla refunds the deposit instead of applying it towards the S/X. And even if out of 420k reservations 25% cancel (and it might actually be 25% of US reservations as I doubt they can track EU CC-s), then that still leaves > 300k reservations waiting for the car with 5k/week new reservations or now orders (which wouldn't count as reservations as there's no longer the 1k deposit).

So unless there is a real source to the story it's still a useless FUD story. 300k @ 5k/week is > 1y of manufacturing.

 

[Adm]

Here is a german article on how German OEM's deal with suppliers:

Google Translate

 

[adaptabl]

Frankly, the references here to CapEx projects that began in 2016 but are not complete worries me a bit. Sounds like this isn't really suppliers that Tesla is holding up, but contractors installing/providing parts of the plant itself. So what Tesla is doing is demanding a discount on a construction project that is already underway; probably with an implicit threat that they will play games with final payments if the contractor doesn't play ball. How is this different from the way Trump is reputed to commonly stiff his contractors?

Well Elon is a Trump supporter. Maybe he got some advise?

Would be useful with a source link that is trustworthy. And while i highly doubt it's actually 25% cancellations (my own guess would be capped at around 10%-15% max) a substantial part is probably people upshopping to CPO/loaner or what not Teslas. In those cases Tesla refunds the deposit instead of applying it towards the S/X. And even if out of 420k reservations 25% cancel (and it might actually be 25% of US reservations as I doubt they can track EU CC-s), then that still leaves > 300k reservations waiting for the car with 5k/week new reservations or now orders (which wouldn't count as reservations as there's no longer the 1k deposit).

So unless there is a real source to the story it's still a useless FUD story. 300k @ 5k/week is > 1y of manufacturing.

It looks like the majority of the remaining reservation holders are waiting for the SR model as all the other models are available now. It will be interesting to see haw many more cancel once the government rebates start falling off. I believe most were looking at a $35,000.00 car less $7,500.00-$11,000.00 (Depending on the state) making it a $24,000.00-$27,500.00 car. That's a totally different model than what Tesla is pushing now. Maybe that's why the lots are filling up with unsold LR PUP models.

 

[Mario Kadastik]

Lots are not filling up with those when Tesla has tons of P and AWD models on order. Just forget the parking lots already. You have to understand that producing 4+k/week and withholding 11k cars creates a logistics overflow for a company that just recently produced 2k /week. It will take weeks if not a month or two to clear that backlog overflow that required buffering those cars all around. Tesla at this time I doubt produces cars that aren't pre-ordered already. They may see some configurations as being the most common and run the lines in one config a bit more assuming that those orders come in within a few weeks, but that's just line optimization and wouldn't fill parking lots.

 

[jelloslug]

Lots are not filling up with those when Tesla has tons of P and AWD models on order. Just forget the parking lots already. You have to understand that producing 4+k/week and withholding 11k cars creates a logistics overflow for a company that just recently produced 2k /week. It will take weeks if not a month or two to clear that backlog overflow that required buffering those cars all around. Tesla at this time I doubt produces cars that aren't pre-ordered already. They may see some configurations as being the most common and run the lines in one config a bit more assuming that those orders come in within a few weeks, but that's just line optimization and wouldn't fill parking lots.

Exactly, they have just enough room for a few hours worth of production on the output lot at the Fremont factory. They have to go someplace while trains and trucks are queued up. The BMW factory near me does the same thing, they have several lots within a few miles of the factory that they store cars at while they are waiting for whatever mode of transportation to become available.

 

[brianman]

Well Elon is a Trump supporter.

Source?

 

[jelloslug]

Source?

It's his FUD feed.

 

[neroden]

If they're trying to track cancellations by $1000 refunds (since apparently they're using illegally-resold credit card data as their source for "cancellation" numbers) they're going to see a bunch of Powerwall cancellations and miscount them. There are definitely people who are getting frustrated by the length of the Powerwall wait time and are getting other storage batteries.

 

[SO16]

@AviP i think what everyone’s trying to say is,
don’t believe the nonsense. tesla isn’t going anywhere despite waves of attempts to make them fail. If you want the car, get the car. 100s of 1000s of us are. i know numerous tesla owners who will NEVER go back to another ICE vehicle

I know I’m never buying another ICE car again. Even if Tesla did go bankrupt, I’d just get richrebuilds to fix mine.

 

[SO16]

25% cancellation rate on M3. But maybe that is fake news as well

Even if it was 50%, it wouldn’t matter since there appears to be a net gain.

 

[Driver Dave]

It's really frustrating having my posts moderated... No one has laid out the simple bear case for the Wall St Journal memo, and I think someone needs to.

Please consider that Tesla may be having liquidity problems:

• At the end of Q1, Tesla had an equivalent of $882.5 million overseas (see "Liquidity and Capital Resources" in 10Q), $985M in customer deposits, and $798M in other cash sources.
• At the end of Q1, Tesla had -2.2B net working capital.
• At the end of Q1, Tesla's cash (2.67B) cleared accounts payable (2.6B) by 70M.
• At the end of Q1, Tesla stated that they had an additional 2.35B in planned CapEx this year.
• Given that Tesla has planned CapEx spend, we would expect cash to go down and PP&E to go up, thus further straining net working capital.
• Tesla ended last quarter with a large amount of inventory. According to the TMC spreadsheet, that inventory has not yet been liquidated. Deliveries haven't caught up to production.
• This is why the Lathrop field is so concerning. 2500 cars were sitting in the desert all weekend.
• The US Dollar significantly strengthened this quarter, which could further strain working capital. USD/EUR went from .813 to .851 (gain of 4.67%). USD/CNY went from 6.28 to 6.76 (gain of 7.64%).
  
• At this point, you would expect cash to be well below payables
  • luvb2b's great thread estimates cash at 1.9B, payables at 3.6B, and net working capital at -2.75B...
  • Also estimates -750M in cash.

They're in the middle of a liquidity crisis. Is that really so unfathomable?

Do the exercise: at what level of working capital would you expect Tesla to become insolvent? Is it 50% of revenue? 75%? 100%?

And yes, I'm calling Elon Musk a liar. He lied last summer when he said they could reach 20,000 Model 3 cars per month in December. He lied tonight when he said they were delivering ~6000 per week.

I think Tesla is being deceptive when they call the Lathrop lot a "distribution center" - they don't address the root question of why more cars aren't moving on/off the lot, especially given their business model that each car is made to the configuration of the buyer.

I think Tesla is being deceptive when in their response to the WSJ memo - they don't address the most vital nugget of the piece, which is the concerning cash position ("necessary for continued operations" quote).

The problem Tesla currently faces is that they tried to instantly ramp from 1550 Model 3s/week (on average) to 5000 Model 3s/week (on average). That's a huge jump.

And their cash position doesn't afford them errors like this anymore. They have payments due to suppliers, and Tesla can't sustain operations at current prices.

Here's the deal.

You know nothing.

Really.

You aren't there.

You are making up conclusions based on stuff on the net and other people's analysis of stuff on the net.

I"m always amazed people trade based on this.

Here is what I see:

Amazing product.
High demand with no advertising.
Everyone that drives one, wants one.
An established locked in ecosystem.
Cult of personality leader that top tech people look up to.
Competitors flailing. (Like Nokia faced with Apple)
Not just cars, energy.
The obvious future.

I saw this with Apple.
I saw this with Facebook.

I made a lot of money betting on them, against the naysayers.

Tesla is the same thing.

Lots of mudslingers, more forces against them than any other company will ever have: old car manufactures not wanting to change, car dealers skimming off every deal, oil industry monopoly fixing prices.

But Tesla will succeed.

Because as much as everyone is against them, it is currently doing the future, extremly well.

And that always wins.

 

[Hitman007]

Here ya go: 24% of Tesla Model 3 orders have been canceled, analyst says

 

[EVMeister]

Here ya go: Elon Musk on Twitter.

 

[Hitman007]

It's really frustrating having my posts moderated... No one has laid out the simple bear case for the Wall St Journal memo, and I think someone needs to.

Please consider that Tesla may be having liquidity problems:

• At the end of Q1, Tesla had an equivalent of $882.5 million overseas (see "Liquidity and Capital Resources" in 10Q), $985M in customer deposits, and $798M in other cash sources.
• At the end of Q1, Tesla had -2.2B net working capital.
• At the end of Q1, Tesla's cash (2.67B) cleared accounts payable (2.6B) by 70M.
• At the end of Q1, Tesla stated that they had an additional 2.35B in planned CapEx this year.
• Given that Tesla has planned CapEx spend, we would expect cash to go down and PP&E to go up, thus further straining net working capital.
• Tesla ended last quarter with a large amount of inventory. According to the TMC spreadsheet, that inventory has not yet been liquidated. Deliveries haven't caught up to production.
• This is why the Lathrop field is so concerning. 2500 cars were sitting in the desert all weekend.
• The US Dollar significantly strengthened this quarter, which could further strain working capital. USD/EUR went from .813 to .851 (gain of 4.67%). USD/CNY went from 6.28 to 6.76 (gain of 7.64%).
  
• At this point, you would expect cash to be well below payables
  • luvb2b's great thread estimates cash at 1.9B, payables at 3.6B, and net working capital at -2.75B...
  • Also estimates -750M in cash.

They're in the middle of a liquidity crisis. Is that really so unfathomable?

Do the exercise: at what level of working capital would you expect Tesla to become insolvent? Is it 50% of revenue? 75%? 100%?

And yes, I'm calling Elon Musk a liar. He lied last summer when he said they could reach 20,000 Model 3 cars per month in December. He lied tonight when he said they were delivering ~6000 per week.

I think Tesla is being deceptive when they call the Lathrop lot a "distribution center" - they don't address the root question of why more cars aren't moving on/off the lot, especially given their business model that each car is made to the configuration of the buyer.

I think Tesla is being deceptive when in their response to the WSJ memo - they don't address the most vital nugget of the piece, which is the concerning cash position ("necessary for continued operations" quote).

The problem Tesla currently faces is that they tried to instantly ramp from 1550 Model 3s/week (on average) to 5000 Model 3s/week (on average). That's a huge jump.

And their cash position doesn't afford them errors like this anymore. They have payments due to suppliers, and Tesla can't sustain operations at current prices.

Exactly. Well said. Too many people are emotionally attached to this company. They feel if you slam the company you are slamming their car and their dream. Not true. Its a great product. Technology is incredible but the company is in trouble. If they go bankrupt which I think they will by year end, there is some risk to owning a Tesla. Support, parts, service, etc.