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TESLA Headed for Lack of Cash Again?

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gnuarm

Model X 100 with 72 amp chargers
At the moment Tesla is making money with a net positive cash flow. But while sales of model 3s are good, the model Y is going to become another cash drain. If they really want to be shipping these things in volume by the end of the year as well as building a new factory in China, they are going to be spending money like it's on fire.

You think losing better part of a billion each quarter was big news before? Wait until that is happening *after* selling 60,000 model 3s a quarter.

Where are they going to get the cash they need to build so much so quickly?
 
Sure, they are so poor so they just acquired Maxwell for $218 million.

People keep saying Tesla's running out of cash but it can still find cash anytime it wants.

Don't worry about it!

"The all-stock transaction worth over $200 million was announced by Maxwell this morning and we reached out to Tesla to confirm the news."

If you don't understand simple issues like the difference between a cash deal and a stock deal, you should never invest in a company.

Tesla currently has $3.69 billion cash and will have nearly a billion in bond payment to make March 1. That brings them down to $2.77 billion cash. They've already said to expect lower profits going forward.

They appear to be accessing debt to build the China facility. What about the Nevada production facility? Debt takes money for the interest payments. That eats into profits. With lower profits in already in Q1 and debt rising this year along with expenditures in Nevada, will they have any profit left when they reach Q4?
 
...Where are they going to get the cash they need to build so much so quickly?

In the beginning, getting cash was difficult because Tesla was a private company. It had to go back to the same family and friends to get cash to pay bills.

It's difficult to ask more money from the outside circle because they wouldn't know who you are and they wouldn't know if you could even build a car

It was difficult but not impossible. It has survived as a private company from 2003 to 2010.

In 2010, Tesla went public. Since then, whenever Tesla has ever needed cash, it has been able to get it very easily from the public. There's no need to go back to family and friends to beg for cash.

Thus, the public is Tesla's cash.

Debt is only a problem if Tesla would default on it but it has never done that.

Short sellers were predicting that Tesla wouldn't be able to cover its $230 million convertible bonds due in November 2018 and Tesla would doom.

Well, it has been 3 months and all the repeated doom and gloom prophecies have never come true since 2003.
 
Provided they can do it at a reasonable interest rate, Tesla should go back out to the bond market and raise enough money to refi the debt due in 2019 and to finance the capital expenditure for Model Y in Nevada, and also to build out a factory in Europe.

This should not be taken as "Tesla is short of cash", but a rapidly growing public company taking on long term debt as a normal and reasonable part of their operations to fund growth of fixed and current assets.
 
In the beginning, getting cash was difficult because Tesla was a private company. It had to go back to the same family and friends to get cash to pay bills.

It's difficult to ask more money from the outside circle because they wouldn't know who you are and they wouldn't know if you could even build a car

It was difficult but not impossible. It has survived as a private company from 2003 to 2010.

In 2010, Tesla went public. Since then, whenever Tesla has ever needed cash, it has been able to get it very easily from the public. There's no need to go back to family and friends to beg for cash.

Thus, the public is Tesla's cash.

Debt is only a problem if Tesla would default on it but it has never done that.

Short sellers were predicting that Tesla wouldn't be able to cover its $230 million convertible bonds due in November 2018 and Tesla would doom.

Well, it has been 3 months and all the repeated doom and gloom prophecies have never come true since 2003.

Of course short sellers predicted all sorts of things. I'm asking if Tesla will have the cash they need to get the model Y out the door as well as open a facility in China and bring the pickup to production, etc, etc, etc, as they keep talking about.

I always find it interesting when someone ignores current facts and looks to the past as if past successes guaranteed future successes.

While I think Tesla has done great things so far, they have had many failures as well. While they did finally get the model 3 into volume production, that happened some six months later than they forecast and the forecast was important in terms of keeping the company afloat. Musk himself pointed out that they were not so far from running out of money.

Tesla has also failed regarding a $35,000 model 3. That is a big inhibitor to sales. It's almost humorous how Musk says there is lots of demand for the model 3, just not at the price they are selling it! lol

The lateness of achieving milestones is par for the course with Tesla. At some point it won't be cute anymore.

With more competition coming up in the next couple of years Tesla will need to start operating like for-profit company, meeting deadlines and achieving goals, especially financial goals.

Does anyone actually expect to see model Y cars rolling off a production line in any real volume by the end of 2019 like they are forecasting?
 
Tesla has also failed regarding a $35,000 model 3. That is a big inhibitor to sales. It's almost humorous how Musk says there is lots of demand for the model 3, just not at the price they are selling it! lol

Tesla is selling every 3 they make, and are currently shipping high content versions overseas. What sales are they missing out on?
 
I wish I could find the chart on this (I'll keep looking) -- a while back someone on the forums posted a really informative graph that showed Tesla's historical cash flow from the start, and it was very interesting. Negative cash flow as they were developing the S, then a brief positive cash flow as the S started selling, then negative again as the X was developed, then another brief positive cash flow as the X started selling, then negative again as the Model 3 was going into production... The prediction was that the positive cash flow, once the 3 started selling, would be much greater than those with the S and X -- and that's exactly what happened.

These results are exactly what I would expect for a company that wants to develop a broad offering of products -- initially take any income and reinvest it to make additional products. At least this iteration, the Model 3 is a sustained revenue generator, and less of a niche product than the expensive S or X -- so I'd expect those negative cash flow dips (and the need for borrowing) to become less extreme going forward.
 
... Musk himself pointed out that they were not so far from running out of money...

That is not news. As a private company, Tesla was short of cash numerous times and if it didn't get the funding we wouldn't have today's Tesla. The risk was huge as a private company.

But today?

Remember, Tesla is now a public company. So, when Musk said that it's running out of money, we need to take it with a grain of salt.

Just like when the Traffic Controllers who could no longer get paid during the government shut down. It's not because there's no money. It's just a self imposed disciplinary action from the government.

Back to Musk statement of running out of money. That's a self-imposed discipline guideline because Tesla can get money any time it wants by just asking the public!
 
Does anyone actually expect to see model Y cars rolling off a production line in any real volume by the end of 2019 like they are forecasting?
Well, considering that they have said that the Model Y shares ~70% of the Model 3's components (presumably the entire battery, drive system and much of the chassis), this is a much lighter lift than tooling up for the Model 3 was -- I definitely don't think we'll see the kind of production hell we saw with the 3.
 
"...profits...profits....

Did you read Form 8-K. August 7, 2013 Shareholder Letter?

"While profits were still modest in absolute terms and not our primary mission, income increased by 70% from last quarter, driven by record Model S deliveries and a significant improvement in automotive gross margin. "

Musk has repeatedly said that profits are not the primary goal. You are investing in the wrong company!
 
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Well, considering that they have said that the Model Y shares ~70% of the Model 3's components (presumably the entire battery, drive system and much of the chassis), this is a much lighter lift than tooling up for the Model 3 was -- I definitely don't think we'll see the kind of production hell we saw with the 3.

That is exactly the point. They had problems getting the model S out the door because it was their first car and they said things would go more smoothly with the next one. They had problems getting the model X into production because it was a much more complicated car to make and they said things would go more smoothly with the next one. They had problems getting the model 3 into full production because they had never made a high volume production car before. Now we should believe, "things would go more smoothly with the next one".

So when we talk about cash flow and people want to look back to say, we've always had cash flow problems and they've always been resolved. But when it comes to producing cars we don't consider history?

I'm not forecasting doom and gloom. I'm just looking at the reality of what is likely to happen and trying to understand what Tesla can do to prevent problems. Musk has been adamant that there will not be another IPO. That leaves loans. He is getting loans from the Chinese for the factory there. I hope that works out, but it will reduce profits until it starts to produce cars in 2020... we hope.

Meanwhile nothing is being said about how the factory in Nevada is going to be built out. If the plans were in the works and everything was lined up, don't you think there would be a tweet, "funding secured"???
 
That is not news. As a private company, Tesla was short of cash numerous times and if it didn't get the funding we wouldn't have today's Tesla. The risk was huge as a private company.

But today?

Remember, Tesla is now a public company. So, when Musk said that it's running out of money, we need to take it with a grain of salt.

Just like when the Traffic Controllers who could no longer get paid during the government shut down. It's not because there's no money. It's just a self imposed disciplinary action from the government.

Back to Musk statement of running out of money. That's a self-imposed discipline guideline because Tesla can get money any time it wants by just asking the public!

Really??? Do they have to say, "pretty please"??? What the heck are you talking about???
 
Really??? Do they have to say, "pretty please"??? What the heck are you talking about???

Yes. Tesla has nicely asked the public with the word "pretty please" and the public has been always more than happy to supply cash to the company.

In an emergency, Tesla can access its credit line.

Otherwise, it can get more cash from stock and debt offerings.

Each time Tesla offered stocks and debts in the past, the public grabbed them all with no hesitation.

Those were the times that Tesla made zero profit.

What changes now is Tesla has made profits.

That change should not scare off the public if there will be future stock and debt offerings again.
 
Did you read Form 8-K. August 7, 2013 Shareholder Letter?

"While profits were still modest in absolute terms and not our primary mission, income increased by 70% from last quarter, driven by record Model S deliveries and a significant improvement in automotive gross margin. "

Musk has repeatedly said that profits are not the primary goal. You are investing in the wrong company!

Do you actually understand what any of those terms mean? Gross margin (profit) is the profit created by building cars and selling them without considering the costs other than just building the cars. It is important for this number to be high enough to cover the other operations such as sales and R&D. Income (several types) takes into account more of the costs of running the company. The numbers you should be interested aren't as high as the numbers you hear about.

It is nice to say the purpose of the company is not to make profit, but if they don't continue to make profit they won't accomplish any other goals either. Even not for profit companies can't continue to to lose money. Profit is required... just like cash flow.
 
Yes. Tesla has nicely asked the public with the word "pretty please" and the public has been always more than happy to supply cash to the company.

In an emergency, Tesla can access its credit line.

Otherwise, it can get more cash from stock and debt offerings.

Each time Tesla offered stocks and debts in the past, the public grabbed them all with no hesitation.

Those were the times that Tesla made zero profit.

What changes now is Tesla has made profits.

That change should not scare off the public if there will be future stock and debt offerings again.

I hate to tell you, but public offerings are not typically dominated by individual purchasers. The offering has to be available to the general market, but the bulk of the stock is already committed to a relatively small number of very large investors at agreed on prices. The idea that Tesla can go to the stock markets and get any money they want is not reality. Then on top of that Musk has said he simply won't do that because every new share sold devalues the previously sold shares. It's like cutting your pizza into more slices. Yeah, you get more slices, but now they are smaller.
 
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