Excellent analogy. Tesla has major challenges to lasting as a company.
It spends about $100M per quarter and it has $200M of cash [1]. So in the next 6 months, Tesla will need to bring margins way up (unlikely), dramatically cut expenses (opposite of the current plan), or raise lots more money.
The company already has $400M in debt. I hope it can raise more. Or that the public will pony up more investment. I also really really want Tesla to succeed.
If they can build the 5000 cars they claimed for this year (honestly, its doubtful) then they have ~$75k (rough guess on avg car price) * 5000 = ~$375m coming their way this year. And they have a huge backlog of orders (~13.8k), so it's really just a question of if they can scale up their production fast enough to close the gap. It'll happen, possibly without any bridge financing.
Revenues are not cash flows. That $375M of revenues from car orders has real costs associated (i.e. materials, labor).
Ford and GM, established car makers, have gross margins of about 12-15%. Tesla's margins are much lower, at least today. But let's ignore working capital needs and pretend Tesla had the "great" margins of its competitors, then that's still only $50M of cash contribution. Tesla will need lots of cash this year.
Comments
Excellent analogy. Tesla has major challenges to lasting as a company.
It spends about $100M per quarter and it has $200M of cash [1]. So in the next 6 months, Tesla will need to bring margins way up (unlikely), dramatically cut expenses (opposite of the current plan), or raise lots more money.
The company already has $400M in debt. I hope it can raise more. Or that the public will pony up more investment. I also really really want Tesla to succeed.
[1] See "Cash Flows" tab: http://www.google.com/finance?q=NASDAQ%3ATSLA&fstype=ii&...
If they can build the 5000 cars they claimed for this year (honestly, its doubtful) then they have ~$75k (rough guess on avg car price) * 5000 = ~$375m coming their way this year. And they have a huge backlog of orders (~13.8k), so it's really just a question of if they can scale up their production fast enough to close the gap. It'll happen, possibly without any bridge financing.
Revenues are not cash flows. That $375M of revenues from car orders has real costs associated (i.e. materials, labor).
Ford and GM, established car makers, have gross margins of about 12-15%. Tesla's margins are much lower, at least today. But let's ignore working capital needs and pretend Tesla had the "great" margins of its competitors, then that's still only $50M of cash contribution. Tesla will need lots of cash this year.