Re:GM says it will put fleets of self-driving cars in cities...
by gamblor956 on Friday December 01, 2017 @12:09PM
(#15825253)
Tesla also currently sells Model 3s at a loss using the same GAAP[1] accounting metrics GM uses. (Their latest quarterly report states that they're not even break even on a non-GAAP method of accounting.[2])
The difference is that GM can afford to absorb the loss while it ramps up production. Tesla needs the Model 3 to be profitable, or the company dies.
[1]GAAP = generally accepted accounting principles. In other words, standardized methods of accounting for profit and loss. Tesla uses non-standard (i.e., non-GAAP) accounting in its financial reports to paint a rosier picture of its financial state than GAAP reporting would provide. Some people say that non-GAAP reporting paints a more accurate picture of a company than GAAP. This might be true for new industries that don't have sufficient history to establish industry-specific GAAP. However, the auto industry has been around for more than 100+ years, so the use of non-GAAP accounting by Tesla and Faraday is generally indicative of unstable financial health.
The difference is that GM can afford to absorb the loss while it ramps up production. Tesla needs the Model 3 to be profitable, or the company dies.
[1]GAAP = generally accepted accounting principles. In other words, standardized methods of accounting for profit and loss. Tesla uses non-standard (i.e., non-GAAP) accounting in its financial reports to paint a rosier picture of its financial state than GAAP reporting would provide. Some people say that non-GAAP reporting paints a more accurate picture of a company than GAAP. This might be true for new industries that don't have sufficient history to establish industry-specific GAAP. However, the auto industry has been around for more than 100+ years, so the use of non-GAAP accounting by Tesla and Faraday is generally indicative of unstable financial health.
[2] https://www.forbes.com/sites/alanohnsman/2017/11/01/tesla-pi...