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Why almost everyone was wrong about Tesla’s cash flow situation

arstechnica.com

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Re: Why almost everyone was wrong about Tesla’s cash flow situation

#181

Post by esotericn »

antisthenes wrote: post #76
esotericn wrote: post #52

Earlier quoted context omitted.

Maybe I'm just an outlier. My cars generally cost about 300-500 quid. If it breaks I buy another one. I can buy 5 or more of them for your quoted 3K. Are they as safe as a Model S? No. Are they substantially more dangerous than other things I do in my life? Probably not. Once things start to break you scrap it and get another one. Done. I bought a Civic for 325 GBP, changed the tyres for ~150, and drove it around hal…

Aren't insurance costs way higher than the amortized cost of the car itself? Especially in the UK? > In the US you have the issue that a car might be a hard requirement to get to work. In that case I'd probably just buy two and drive them on alternate days so there's always a backup. As long as you're not paying almost double insurance, this sounds like a good option. You could even rent the other car out on the C2C…

This is the case, yes, but generally insurance companies are aware that you can only drive one car at once and adjust premiums appropriately.

That said, in the UK it's hard for me to think of a circumstance in which two cars would be a hard requirement for someone who can't 'afford' a decent car.

Here, you probably live in or close to a city. You might not want to cycle in or get a taxi/bus to work every day, but if your car fails you could probably do that whilst getting another one.

So the second car is only necessary if you live in the country, which is a minority, it's nowhere near as common as the sort of "live 30 miles outside of work with no train station" stuff that happens in the US.

If my car breaks it doesn't really even matter. I use it because it's easier to do big supermarket runs and saves a bit of time here and there; the cost equation works out roughly equivalent to using public transport.

Re: Why almost everyone was wrong about Tesla’s cash flow situation

#182

Post by didndkdk »

leesec wrote: post #159
apo wrote: post #135

Tesla in its current form has never had to weather an economic downturn. It will be subject to the same headwinds as any luxury manufacturer. Unlike other car companies that sell luxury, Tesla has no economy model. Some commenters have noted that they can easily afford the price tag. It might be time to consider the transitory nature of that situation. Tesla is an amazing company, (because/but) it has put all its egg…

What are you talking about? Tesla was founded in 2003, and did in fact have to stomach the major economic downturn in 2008. Was not a great time to be a car company, especially a small start up.

2008 occurred when TSLA was insignificantly small. Most had never even heard of it, and they started selling the roadster in 2008 - by 2012 they sold 2200 cars.

Point being they were small enough that a couple of investors, or Musk by himself, can support the company through the storm.

If the financial crisis would hit today, Musk couldn’t keep it afloat by himself for long and would have to raise serious amounts of capital to keep a company its size.

So no. Tesla, as a serious car company, has yet to live through a financial storm. Not as anything other than a niche vanity project.

Re: Why almost everyone was wrong about Tesla’s cash flow situation

#183

Post by [deleted] »

ryanmarsh wrote: post #171
InTheArena wrote: post #7

This seems like a good breakdown - but it's also that Tesla (like SpaceX) runs really really close to the edge every time they do a product launch. How many people doubted SpaceX until the Falcon 9 flew? How many until the Falcon 9 landed on land? How many until Falcon 9 Heavy launched? How many are still doubting until Falcon 9 completes it's first manned mission? How many doubted Tesla until the Roadster shipped? T…

I can't be too specific but the conversations I've had with Tesla's competitors show they're terrified. No matter what competitors say in the press, Tesla is transforming the auto industry in two fundamental ways that traditional car companies cannot adopt quickly. As easy as everyone makes electric cars and online ordering seem, Tesla's competitors are finding this challenging. The auto manufacturers must build a re…

[deleted]

Re: Why almost everyone was wrong about Tesla’s cash flow situation

#184

Post by esotericn »

ianai wrote: post #94
esotericn wrote: post #52

Earlier quoted context omitted.

Maybe I'm just an outlier. My cars generally cost about 300-500 quid. If it breaks I buy another one. I can buy 5 or more of them for your quoted 3K. Are they as safe as a Model S? No. Are they substantially more dangerous than other things I do in my life? Probably not. Once things start to break you scrap it and get another one. Done. I bought a Civic for 325 GBP, changed the tyres for ~150, and drove it around hal…

Having two cars isn’t quite realistic in the US for that context. Someone buying cars like that likely lives in an apartment in a city with limited parking. I’m sure it happens, but it’s not scaleable. Granted, that applies to many things in US life.

I suppose it's hard for me to conceptualise because here in the UK, anywhere with restricted parking also has public transport.

Here, generally restricted parking exists within 10-15 minutes walk of a train station (to stop people blocking up residential streets when they commute in to town).

So if there's restricted parking, you can get by with one car (or no cars), for the most part.

Re: Why almost everyone was wrong about Tesla’s cash flow situation

#185

Post by ianai »

esotericn wrote: post #184
ianai wrote: post #94

Earlier quoted context omitted.

Having two cars isn’t quite realistic in the US for that context. Someone buying cars like that likely lives in an apartment in a city with limited parking. I’m sure it happens, but it’s not scaleable. Granted, that applies to many things in US life.

I suppose it's hard for me to conceptualise because here in the UK, anywhere with restricted parking also has public transport. Here, generally restricted parking exists within 10-15 minutes walk of a train station (to stop people blocking up residential streets when they commute in to town). So if there's restricted parking, you can get by with one car (or no cars), for the most part.

My experience has been more and more highly dense real estate is built with exactly the number of parking spaces as needed and no more. Developers extract the most revenue that way - to the detriment of people who actually wind up living there. That was my experience in LV anyway. It looked to be the case in SV as well.

Re: Why almost everyone was wrong about Tesla’s cash flow situation

#186

Post by TekMol »

binarybits wrote: post #113
TekMol wrote: post #2

Short version: They never had a cash problem. They invested the money they had into developing a car. Turned it into a success. Then invested even more into the next car. Turned it into an even greater success. And so on. I wonder how profitable this type of 'short opinion piece' journalism is. How much does a journalist get paid to write something like this? Running some content websites myself which make like $0.00…

Author here. What do you mean by "short?" The piece is 1,500 words, which is about double the length of a typical newspaper column. I'm not going to get into the exact economics, but Ars writers write about a piece a day, and the average piece gets tens of thousands of visitors. Revenue per article (for most mainstream news site, not just Ars) is significantly better than $0.001 per visitor. High-end advertisers are…

Hey, great to meet the author on HN!

First of all, let me say that I liked the article. I am the one who posted it to HN after all.

Maybe "short" was not the perfect word to express what I mean. I mean that the message/idea is kind of short. It's almost like a showerthought "See this chart? It looks like they are in the red all the time. But think of it this way: They build success after success. They could have been profitable ever since Model S. But they keep investing in bigger projects instead.".

Interesting, that the revenue is significantly higher then $0.001 per visitor. Because it looks like the main ad spots are filled with Google Ads. Which I run too. Do advertisers really target specific sites manually via Google Ads? I would have thought they do that algorithmically based on demographic factors.

Re: Why almost everyone was wrong about Tesla’s cash flow situation

#187

Post by GhostVII »

anoncoward111 wrote: post #3

Serious question, and I'm not a Tesla hater either: Why does anyone spend $35,000 - $50,000 on a car? It just feels like a number that is at least 5x too high. A used car from a fairly reputable source can be had for between $3,000 - $6,000, depending on mileage and cosmetic appearance. My 2005 Ford Focus sedan was $3,000 and should last me about 3 years before I need to make a decision about major repairs, so that's…

Most people aren't trying to minimize their transportation costs though, in the same way that people aren't trying to minimize their housing costs when buying a house. People get the nicest car, and biggest house, that they can afford. If you have a long commute, I think it makes sense to get a pretty nice car, considering how much time you spend in it, and how annoying it is to have your car break down or need repairs at random times.

Re: Why almost everyone was wrong about Tesla’s cash flow situation

#188

Post by calabin »

InTheArena wrote: post #168
calabin wrote: post #146

Earlier quoted context omitted.

Responsible cash management and investor relations are not mutually exclusive with innovation. There is absolutely no reason that TSLA shouldn't have raised cash with a relatively inexpensive bond issuance or moderate share issuance in the lead-up to the large expenditures required to begin Model 3 production. As a consequence of this, analysts rightly discounted TSLA's stock price to account for the tremendous amoun…

There are a number of things here that I would quibble with: 1) There are absolutely reasons you can't raise cash with relatively inexpensive bond insurance, or by equity based capitalization. Investors get unhappy, and your bond ratings degrade. Bonds often are secured, so you can't just shaft investors by driving down the stock price. 2) Tesla's stock price is in no way discounted by standards of car companies - ju…

1) I agree that it can cost a material amount to raise money in any manner, be it debt or equity. That said, Tesla was in an okay place to raise money after the success of Models S and X, and had all of the information to reasonably project that spending on Model 3 production would outstrip inflows from existing sales to a degree that could put the company's finances in a relatively precarious state. They were not reasonably inhibited from raising further cash to justify not doing so prior to ramping Model 3 production.

2) You're right, by car manufacturer standards the company is trading at an incredible premium, I should have been more clear. I meant discounted in the sense that "the street" marked their targets on Tesla down from where they had been as a result of these financial concerns.

3) The term "discussions" may even be too strong for the few conversations that occurred prior to the tweet. It was incredibly irresponsible, and it's somewhat difficult to interpret his intent as anything but to manipulate the stock price and punish short sellers.

The author did not debunk the claim that cash management was a problem. Cash management was a problem and may continue to be a problem in the future. Rapid cost-cutting and non-payment to vendors seems indicative of poor cash management to me. Anytime that a company's runway becomes a relevant part of an objective analysis, there are cash issues. Tesla did not need to give cause for investors to call into question its financial stability in order to make the Model 3.

Don't get me wrong, I want Tesla to thrive. It just seems as though many of these issues of financial stability need not have occurred. I agree that better governance is in order and that Tesla and many other organizations can benefit from a greater degree of independent oversight.

Re: Why almost everyone was wrong about Tesla’s cash flow situation

#189

Post by jklinger410 »

Angostura wrote: post #173
jklinger410 wrote: post #153

Earlier quoted context omitted.

Agreeing with both of you but want to chime in with some conspiracy theory stuff. The only way you beat Musk is by going somewhere that his idealism won't allow him to go, while still maintaining positive public opinion of yourself as his competitor. I am looking directly at the Oil and Big Auto companies when I say people have incentivized bloggers (aka "journalists") and paid online trolls to make him look like the…

> I am looking directly at the Oil and Big Auto companies when I say people have incentivized bloggers (aka "journalists") and paid online trolls to make him look like the bad guy They made him spout off about the Thailand-based diver being a paedophile? He bought this stuff on himself, you don't need a conspiracy to explain why the shine came off.

No, they obviously didn't do that. The undercurrent of negative opinion about him goes well beyond that, though.

See: Pissbaby richboy who doesn't help the world and is just a jet-setting Tony Stark wannabe.

^ Has nothing to do with Thailand.

Re: Why almost everyone was wrong about Tesla’s cash flow situation

#190

Post by Nokinside »

notaki wrote: post #130
Certhas wrote: post #117

Earlier quoted context omitted.

I'm not convinced about the multi year advantage. Everyone else has EVs out. They are not pushing them, probably because they are reaping the profits on past ICE investments, but the next tech platforms under development for years now at VW/Mercedes/BMW are electric. VW is planning to get to 10 million EVs by 2022. I'd give credit to Musk and Tesla for bringing forward this point by several years, but it would be sil…

But no one else is mass producing EV's. VW is just starting to talk about building a gigafactory. Everyone is doing a lot of talking, but they are all years behind Tesla. And even if they stop talking and start doing, they'll need to build a more compelling product than Tesla. That will be very very difficult. Tesla FTW.

It's not just talk. Several projects have already started in Europe. Some of them have former Tesla executives.

Tesla owns the patents and innovates only in the battery packs. The battery cell technology is owned by Panasonic.

South Korean, Japanese and Chinese are leading in battery cell technology and not all of them are teaming with Tesla.

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