Tesla Burns Through Record Cash to Bring the Model 3 to Market
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Re: Tesla Burns Through Record Cash to Bring the Model 3 to Market
#2> The company burned through $1.16 billion in cash in the second quarter by spending on capacity for its cheapest model yet and boosting battery output.
This makes me very happy. It's very rare for a large company to literally risk their existence to bring a new product to market. Most prefer to just sit in the pile of cash and profit from margins...
Re: Tesla Burns Through Record Cash to Bring the Model 3 to Market
#3“You’re holding it wrong”
Wonder if Tesla will have that moment. Recalling the Model 3 is probably their greatest fear. No product is perfect and they’re about to ship tens of thousands a month within a very short period of time
Re: Tesla Burns Through Record Cash to Bring the Model 3 to Market
#4> The company burned through $1.16 billion in cash in the second quarter by spending on capacity for its cheapest model yet and boosting battery output. This makes me very happy. It's very rare for a large company to literally risk their existence to bring a new product to market. Most prefer to just sit in the pile of cash and profit from margins...
I don't think it's much of a risk. They created a product that is way differentiated from every other car out there and people want to buy it. It's like seeing the iPhone for the first time, and all the other flip-phones out there is simply just not enough anymore. They will succeed. If I'm in the market for a new car, I would totally line up for this one.
Re: Tesla Burns Through Record Cash to Bring the Model 3 to Market
#5> The company burned through $1.16 billion in cash in the second quarter by spending on capacity for its cheapest model yet and boosting battery output. This makes me very happy. It's very rare for a large company to literally risk their existence to bring a new product to market. Most prefer to just sit in the pile of cash and profit from margins...
I think a slower roll out would be prudent. If you burn all your cash and you are forced to raise cash it puts you in a bad situation. This is brand new car. Companies like Toyota have issues with their cars and they generally only make incremental changes to each model, and Toyota Production System is probably one of most taught and studied system for production.
Re: Tesla Burns Through Record Cash to Bring the Model 3 to Market
#6> The company burned through $1.16 billion in cash in the second quarter by spending on capacity for its cheapest model yet and boosting battery output. This makes me very happy. It's very rare for a large company to literally risk their existence to bring a new product to market. Most prefer to just sit in the pile of cash and profit from margins...
I think a slower roll out would be prudent. If you burn all your cash and you are forced to raise cash it puts you in a bad situation. This is brand new car. Companies like Toyota have issues with their cars and they generally only make incremental changes to each model, and Toyota Production System is probably one of most taught and studied system for production.
If you haven't seen a review on the model 3 I highly suggest MKBHD's review. He goes over how a lot of pieces of a standard car are stripped out (I.e. No physical buttons) this was to reduce manufacturing complexity and increase production speed. Toyota does not build cars like the way Tesla has engineered this end to end.
Re: Tesla Burns Through Record Cash to Bring the Model 3 to Market
#7> “He’s going to need capital,” said Ross Gerber, chief executive officer of Gerber Kawasaki Wealth & Investment Management, which holds Tesla shares. “That’s the one part of the financials that are a little bit troubling. To underestimate the cash burn over the next six months will be a mistake.”
It's not that troubling. Even massive companies (AMZN in 2014) need to raise big capital. When you have something you want to do, you get the money and spend it.[1]
This seems to be constantly framed as negative ("they aren't making any money!"), but that's the correct growth strategy for what Musk wants to do. Nobody adds tons of debt just to not use it. Cribbing from my comment yesterday:
I've owned TSLA a long time and I hope they don't start making money, and continue the Amazon model and actually build something with years of minimal or no profits, re-investing vigorously. Amazon had almost 20 years in business without "making any money" except a few quarters where they accidentally eked out some non-trivial profit.
But without their spending, they wouldn't have become Amazon. Without Tesla's spending, they won't be a future company, they'll just be a tiny car company.
For some historical comparison: Amazon added $6bn in debt as recently as 2014. Even very large and very successful companies take on debt to fuel growth far beyond "bootstrap" numbers. Both companies leverage as much investment money as they can to build and expand as fast as they can. If you look at Amazon's raises in the late 1990's you'll find something more comparable to Tesla today relative to revenue. In 1999 Amazon raised $1.25 billion, and their revenue for the year was $1.64 billion. So they raised proportionally way more money than Tesla has so far this year. And spent it all!
full comment here: https://news.ycombinator.com/item?id=14915317
[1] The flipside of this is that it's an indictment of companies that hoard huge amounts of cash, like Apple. That they can't find a way spend it building future stuff is a signal that they are out of big ideas, and (in the case of Apple) have been for some time.
Musk and Bezos, on the other hand, have clear ideas of what to spend money on to build something.
Re: Tesla Burns Through Record Cash to Bring the Model 3 to Market
#8> The company burned through $1.16 billion in cash in the second quarter by spending on capacity for its cheapest model yet and boosting battery output. This makes me very happy. It's very rare for a large company to literally risk their existence to bring a new product to market. Most prefer to just sit in the pile of cash and profit from margins...
To sit in your pile of cash and profit from margins, you need to make money and have positive margins. You make it sound as if they could have chosen that path...
Re: Tesla Burns Through Record Cash to Bring the Model 3 to Market
#9The harder they will hit the wall
Re: Tesla Burns Through Record Cash to Bring the Model 3 to Market
#10> “He’s going to need capital,” said Ross Gerber, chief executive officer of Gerber Kawasaki Wealth & Investment Management, which holds Tesla shares. “That’s the one part of the financials that are a little bit troubling. To underestimate the cash burn over the next six months will be a mistake.” It's not that troubling. Even massive companies (AMZN in 2014) need to raise big capital. When you have something you wan…
Yes, I learned this fact painfully. I bailed on my IPO AMZN shares because they kept taking on massive debt. Just didn't have the stomach for it.
Of course, that was 2004, about 1/20 of today's price.