Very aware of the cost of building factories and very aware of once you have one up and running pumping out a desirable product what a cash cow they can be.
What you call a failure looks like it is going to be ragingly profitable.
It was a failure in the sense of producing cars with a known expenditure on a known schedule with a known profit. Companies have to make profit to survive and can't spend more money than they have in the bank. If Tesla can't get the model Y out the door on time and under budget, they will be looking at the same problems they saw with the model 3 that brought them close to having major financial problems.
Everyone here seems to think the fact that they managed to pull it off once means they will be able to repeat the same performance any number of times, but there will be differences not in their favor.
1) It ain't the "new" thing the model 3 was so they won't be able to rope in $100's of millions of dollars of reservation money.
2) They will need to expand every part of their company (something the failed to do with the model 3 and resulted in getting a lot of bad press on service and now charging).
3) Expanding into China will be a major focus shift taking the eyes of management off the entire US production efforts while they go through "foreign communications" hell.
The list goes on.
Q1 small profit but large free cash positive other then the bond payment. Those investments in factories get written off as depreciation.
Yup, great for the balance sheet, but producing zero actual cash.
Q2 large profit large free cash flow. Q3 and Q4 are going to be profitable and seriously free cash flow positive. No need for additional equity to be sold. The building of additional factories, will generate the depreciation that will limit profitability but allow strong free cash flow for further investments.
I don't know what you base any of this on. As they ramp up the Shanghai factory they will be spending a lot of money that isn't part of the loans (secured by capital). They have to pay salaries while they train people and get production lines functional. It will be nearly as much as making cars, but with no cars being made. The question is whether this will be for six months or a year or longer? While Tesla is making money at the moment, they have failed in every attempt to get a new model into production on schedule and under budget.
Depreciation doesn't create cash flow. It is a way of accounting for capital investment for tax purposes. Buying capital isn't a loss (the thing you bought is worth the money paid) so you don't get a tax advantage. Then you depreciate it over 10 or 20 or 30 years and each year you deduct that portion of it as a loss on the taxes. The only cash advantage is the tax not paid on the deduction.
Model Y will be a money drain short term. You know as far as you can see
but will turn out to be cash cow in a couple of years.
Maybe sooner than a couple of years. The problem is what happens in the mean time. It's not all clear sailing, especially since they are building two new production lines at the same time or at least overlapping. If the Shanghai factory is late, they will be spending massive amounts of money trying to get it running while spending massive amounts of money on the Nevada model Y factory. This will likely delay the model Y production date.
These may not be certainties, but they are not implausible possibilities.
Why build in China? Reduced manufacturing costs and reduced transportation cost for regional markets.
Nothing wrong with that. I'm just pointing out that Tesla seems to suck at doing anything on time and on budget. As Musk said himself, "Don't ask me how long it will take, I've never run an automotive company before". That says it all in a nutshell.
