First disagree I think I've had with one of your posts.
Tesla built 2 new Gigafactories, the MegaPack factory, while paying down debt by the tune of 1-2 billion every quarter over the past year and still stayed FCF positive on consistent basis.
It's simple math. If Tesla stayed FCF positive despite those headwinds, then Tesla will post massive FCF going forward.....even if the macro environments deteriorates into a deep recession where Tesla has to drop prices materially.
That's because Tesla has zero new factories in the pipeline. They will announce the site of a new one maybe this quarter. Which means the heavy costs associated with the new Gigafactory won't happen until Q2 2023 at the earliest. More likely Q3 2023.
Tesla has a runway of 3-4 quarters of no new headwinds to FCF growth and in fact has 3 factories (Berlin/Austin/Megapack) that were headwinds to FCC in the past year that are now tailwinds for FCF. It's not out of the realm of possibility that Tesla doubles its cash over the next 4 quarters.
And let's not forget that just because a company announces a buyback doesn't mean they will spend X number of cash right away. They can just announce a stock buyback of 5 billion over the next 4 quarters, starting in Q4. It would be up to Tesla's discretion as to when and how much it buys
Yes they have done that and I think it's very probable 99%+ that this continues. I've shared my financial models and that's what I'm projecting even in my bear case. The risk here is the gigabear case.
Tesla is currently the beneficiary of many positive feedback loops compounding on each other, such as growing demand, growing production, growing brand awareness, growing financial strength, growing gap between cash received and accounts payable, and growing technology lead. I wrote about this in my recent essay on preferential attachment effects and why Tesla's domination is likely to continue for the foreseeable future.
However, those virtuous cycles could unwind in a hurry with sufficiently severe macro problems, especially as Tesla currently has just four car factories, two of which are in the same country and two of which are still ramping up with low production rates right now. We have it really
really good right now, especially in the countries TMC members live in. That doesn't mean it's necessarily going to last forever without disruption.
Human history is filled with misery and all manner of crappy things happening, natural disasters, and evil leaders doing evil stuff. If you asked a Roman citizen in AD 180 during the reign of Marcus Aurelius about the prospects for the Roman Empire to continue as they had for the prior 150 years since Augustus, they probably would have laughed off any concerns of risk of collapse. "
Semper est Roma," they would say
. Yet look what happened. Similar story with the Macedonians, Persians, Mongols, Mayans, Egyptians, Babylonians, Assyrians, Carthaginians, Greeks, Tang, Song, Qin, British, Spanish, French, Dutch, Aztecs, Japanese, Ottomans and many more. The mighty can and do fall. And stuff happens a lot faster now due to globalization and 21st-century technology.
