You mean, because they have priced them below the price that would clear their ability to produce, and have either inadequate resources or inadequate competence to scale production to meet the quantity demanded at the current price. So, they are failing at either production or pricing or both, and losing money because of it.
[1] https://ycharts.com/companies/TSLA/gross_profit_margin
Moody's downgraded their debt and it has indeed been plummeting, that's not a creation of the media at all. It's actually the opposite of your claim. If this were any other auto company other than Tesla the stock would be nearly worthless, the media has hyped this thing to the stratosphere.
When things are good, hype is great. Not so much when things start to implode.
Maybe Warren Buffet or another investor with the long view would be a solution?
Tesla cannot make enough of them because Tesla cannot make enough of them.
Everyone knows Tesla can sell those cars instantly if their production lines are up to snuff. But the production targets are laughably behind. 5000 cars/week by Dec2017 ?? Yeah right. Its March2018 and they haven't even hit 5000/week yet.
I wouldn't say they are laughably behind. Projects do get delayed. My own projects got delayed by multiple months. The California high speed rail is 3 years delayed ! Its better to do it right than to just hurry things.
Tesla bet the farm on revolutionizing auto manufacturing while seemingly ignoring much of what other manufacturers have learned over the years.[1] Long-term, elements of that bet could pay pay off. But right now? They're still struggling to scale up Model 3 production. And that's for a car that was literally designed to be less complex to manufacturer, with fewer, simpler parts relative to the Model S and X. It doesn't matter that their manufacturing approach might be more efficient in the future when everything is working perfectly if they can't meet their bills this year.
No other manufacturer has these kinds of prolonged production problems. They meet significantly higher production targets and with fewer quality control issues. If Tesla doesn't show significant progress this year (both on production targets and lowering their burn rate), they're going to be in serious trouble. Most likely, we'll end up seeing Tesla have to hire contract manufacturers like Magna Steyr to build complete cars.
Personally, I'd be fine with that. It'd give Tesla its best chance to entrench itself in the EV market before the traditional automakers step get involved. They, for one, won't have similar problems. I genuinely want Tesla to succeed, but it's become abundantly clear that they don't know how to find a way out of "production hell."
0. https://www.reuters.com/article/us-tesla-results/tesla-puts-...
1. https://www.forbes.com/sites/joannmuller/2016/08/04/tesla-mo...
Do you have $230 million dollars payment due in half-a-year, and $920 million due in a few months after that?
> Its better to do it right than to just hurry things.
Sure it is. But the CEO has to keep the bills paid, and the bill is about to come due. I think its reasonable for people to feel worried right now.
Elon has managed to scrounge up money out of nowhere before. The Model 3 reservation system raised $300 million nearly instantly for instance. So these aren't unfathomable numbers at all.
But its a risk.
Infiniti sold something like 60,000 Q50s globally in 2017 by comparison, for a sedan line they've been selling for decades (the G37 & G35 prior).
Nissan only sold 27,000 Leafs in the US + Europe in 2017, after seven years of availability.
They don't have the bugs worked out yet, so production is behind schedule.
Ultimately it's a big engineering problem.
I've learned not to bet against Musk solving difficult engineering problems.
Tesla isn't failing because of lack of belief in the vision (Which in absolutely no way belongs to Elon btw). Tesla is failing because they took a huge bet on being able to set up a car manufacturer faster than the established market could adopt the technology.
Tesla still has a great brand to it, but it seems unlikely that they will be able to compete on price, so they might end up only having a high-end electric niche which cant justify their current inflated valuation.
Billionaires don't get to be billionaires by throwing money at things with no reasonable expectation of return (well, except Trump, but that's a different story). If Tesla can't figure out how to make money, they're not going to come running. If they were, they'd already be snapping up Telsa's underpriced bonds and stock.
> If anything, this could be a good thing for Tesla
"This is actually good for Bitc^H^H^H^HTesla"
Most people don't know throw billions of dollars around on infirm beliefs, they do it on an expectation of return. If Tesla is getting to the point where the finances no longer support the dream you shouldn't expect billionaires to behave much differently from the markets.
>If anything, this could be a good thing for Tesla as it might attract other owner/operator expertise to the firm.
Oh please, surely techies have seen this 'this is good for bitcoin' enough that they're not going to fall for the same dumb scam with Tesla.
Would another owner/operator really be successful? Musk is probably the only person who could have received so much investment and goodwill over so many years without becoming profitable. And Tesla is going to need to continue to raise money for a while.
If a boring guy from an established car company had been in charge, investors would have run out of patience years ago.
If Lockheed really believes in their device, they ought to buy Tesla.
https://www.cnbc.com/video/2017/12/12/social-capitals-chamat...
Tesla became too big to fail and Musk became too hype to fail.
They need to raise some serious money in a new equity offering, guess we'll see if the market will tolerate that or not.
I disagree. They have a $230 million bond payment due this year but that seems survivable to me.
The $920 million payment due March2019 is the difficult one.
Even if the company were to collapse, I wouldn't expect it to collapse until 2019 at the earliest.
They can raise $2 billion tomorrow morning in an equity dilution. They're not going to collapse in 2019 either.
The $230 million is trivial. They have ~$2.8-$3 billion in cash as of end of Q1.
The issue isn't the next year or two. They still have a lot of market cap available to abuse if they absolutely have to. You can chop their market cap in half right now and they could still raise $2 billion just the same via equity.
The big question is whether the Model 3 gets up to a scale in the next year that pushes their burn rate down toward something a lot more manageable. If not, then investors will probably pummel their valuation and their debt costs will continue to climb, forcing very difficult spending decisions to substantially cut their quarterly losses.
And they're losing $408 million per quarter, on the average. (a loss of 1,632,086 thousands of dollars in 2017, according to their 10K)
At the current rate, Tesla is going to be forced to raise more capital within the next year.
Tesla definitely can survive till 2019 by my math. They can probably survive longer than that if they cut costs. But once Tesla cuts costs, they stop R&D and other "luxury" projects. Cutting costs implies cutting growth.
Tesla is still very much in the growth stage for some reason. They can't afford to cut costs yet.
Steady growth could work by that's make the company a boring "luxury car maker"... at the time scales investors look into.
Part of the function of financial cash markets (options are another matter) is to discount future profits into present prices. An expectation of a 2019 collapse is nearly as good, in terms of present asset price discovery information, as an expectation of a 2018 collapse.
These solvency expectations feed forward to the present, driving prices lower, which makes raising money to avert the expected collapse anywhere from expensive to impossible. It's a . . . "fun" cycle to be caught in.
At $260 / share, I don't think so. Tesla's stock is also in freefall.
Too many people believe in the vision of Elon to let this fall apart because of short term production issues.
If anything, this could be a good thing for Tesla as it might attract other owner/operator expertise to the firm.