Financial Viability of Tesla

Financial Viability of Tesla

How financially secure is Tesla? What is the company's ability to weather delays and unforeseen problems in production?

YourHealthyPlanet | December 1, 2010

I can't answer that, but what I will say is that "Faith is much better than belief. Belief is when someone else does the thinking." - R Buckminster Fuller

I have faith that Elon Musk and the Tesla Team has been through perhaps the hardest yards and with our support and acknowledgment will ensure their success.

Study Fuller and you will see that the direction Tesla is heading in is only going to become easier and easier ... it makes sense to me. All the best.

ChristianG | December 2, 2010

one of the most in depth articles about Tesla and especialy Elon Musks part in it is:

it also covers various financial problems they had in the past and still manages not to drag the whole article in the 'Tesla will never make it lane' so I highly recomend it.

Vawlkus | December 2, 2010

Given that they now have the factory, and most of the equipment needed, if Tesla can survive the next 18 months, they'll be set.

Brian H | December 2, 2010

I saw recently that the stock was rising again, to its highest level, now over $29. That's after the market has had a chance to digest all the latest reports.

Simply Red | February 12, 2015

@Aaron - some people are still debating Tesla's financial security and not even the record snow fall has slowed the "D"
@YHP - your faith was/is well placed!
@CG - enjoyed the article and yes Elon does look like a kid in a toy factory!
@Vawlkus - Tesla survived that 18 months (and many more). They appear set but there are still doubters,
@Brian H - yes, Brian H is still a believer! Now, tell us how great was $29 a share.

I may have heard of Tesla in November of 2010, but (like so many) I didn't have a clue. Brian, anything new in your sites you'd like to discuss?

JAD | February 12, 2015

Nah, they will never make it. Hasn't been a successful American startup company in over 50 years. Next you will tell me they will have sold over 50,000 cars in five years, make a 7 passenger sedan capable of 3 second 0-60, have hundreds of FREE high speed chargers worldwide and constantly be in the news with every announcement, update or tweet.

Cool to see how things have changed so quickly!!!

Phaster | February 12, 2015

Probably still a relevant question- the company didn't meet the Wall St expectations. Musk lacks a filter on these calls, that's refreshing. I'm betting they'll make it and am waiting on my 85D to prove it. I think the naysayers and analysts have to try this car. I was a skeptic until I tried it and then had my "aha" moment and plunked down my deposit. Better technology almost always wins. This is simply a better car, electric or not. I guess for some it is just a stock play, for others it is the future.

sule | February 12, 2015

They are spending money on R&D. They have the best product everyone would want. They have a solid business plan that does not depend on miracles. Even if things stop I have so doubt existing partnerships would help in the event of temporary trouble and there would be other investors too - this is an opportunity not to be missed.

AA_4_Tesla | February 12, 2015

I don't have authority to speak to those questions. From a layman's perspective, I sometimes get confused by Wall Street's reaction.

Tesla is doubling down on building a massive energy factory, increasing their production capacity, building dozens of stores and hundreds of charging stations around the world. I still see them as being in "build" mode, not "make money" mode. The bigger the foundation you need to put down, the longer before the good times roll. But they will come.

ccbldg | February 12, 2015

Your replying to a 4+ year old question? WOW aren't you Mr. Helpful!

Captain_Zap | February 12, 2015

I think he was trying to make a valid point.

Brian H | February 14, 2015

I have no sites. Are you looking for dramatic sights?

Red Sage ca us | February 14, 2015

The problem with Wall Street is that they ask what they believe are rhetorical questions, expecting there are no good answers.

Questions like, "How can Tesla hope to compete?" ... "Where will Tesla find buyers?" ... "When will Tesla be profitable?" ... "Why is Tesla's stock so highly valued?" ... "What the [HECK] is Elon Musk doing as CEO of Tesla?"

And financial analysts jump to precisely the single most inadequate, irrational, and incorrect conclusion as an answer to each and every query. "Tesla must expect to be 'saved' by a REAL car company, they can't play with the big boys..." ... "Tesla has a 'limited market' and is a 'niche player', nothing but a short term fad..." ... "Tesla is inevitably bound for bankruptcy, just you wait and see..." ... "Tesla is just a bubble about to burst any day now, naught more than another high tech Ponzi scheme built on taxpayer dollars and the Green Myth, you just mark my words..." ... "Tesla will never be able to survive with a dreamer at the helm, Elon Musk should be muzzled, tied up, and stuffed in a closet, so that a true professional Captain of Industry can right the ship and protect shareholders' investments..."


I seriously doubt they all believe the malarkey they spew. But they definitely resent being called on their [BOLSHEVIK]. That's why more and more online articles have comments disabled, or require they be 'approved' prior to being displayed when the subject matter is Tesla Motors.

The fact remains that Tesla Motors will answer all outstanding questions through their actions, which will allow for continual growth at an unprecedented rate that prepares the company to withstand any and all onslaughts.

Al1 | February 14, 2015

"the company didn't meet the Wall St expectations". ...

That speaks of expectations, doesn't it?

"This is simply a better car, electric or not". ...

That's what matters.

Grinnin'.VA | February 14, 2015

@ Red Sage ca us | February 14, 2015

The problem with Wall Street is that they ask what they believe are rhetorical questions, expecting there are no good answers. ...

I agree.
IMO, the entire Wall Street 'analyst' community is a gigantic scam. These guys can't predict which stock will go up any better than a 4th grade kid throwing darts at a target covered by stock symbols.

Finally, I'm keeping my TSLA stock and looking for dips for opportunities to buy some more.

Go Tesla!

Out4aDuck | February 14, 2015

Despite the earnings disappointment, I would say that Wall Street is showing strong support. It means that they have confidence in Tesla's long term business plan. And based on the guidance from the Shareholders letter, that confidence will continue to be tested for several quarters. It's unlikely that they will show a profit (non-GAAP) until the Model X is in full production in Q4. In the mean time, cash reserves are still good, so I don't see a crisis brewing.

Brian H | February 14, 2015

Here's the meta-answer. If any Wall Street firm or analyst were consistently right or much better than chance in their calls, the market would be all over them like white on rice. And then they would be wrong, because everybody can't be right at once. There must be some losers, even though it's not a zero-sum game.

2050project | February 18, 2015

@AI1 - agreed. In just two and a half years, Tesla has received so much critical praise, it's hard to argue that they're not financially viable, just look at this infographic today:

ccbldg | February 18, 2015

That teslarati infographic was off by a mile. From what I've picked up so far:

 (119 line items)

Al1 | February 18, 2015

"02/13/14 Model P85D Popular Mechanics applauds P85D in Ice and Snow $203.63"

Must be "02/13/14". Very impressive list.

ccbldg | February 18, 2015


Oops, corrected on the Tesla Timeline, thanks!

2050project | February 18, 2015

@ccldg - awesome list!!

EVBeast | February 18, 2015

Wall street is only concerned with what happens in the short-term. They never reward long-term thinking/planning. That screws up a lot of companies that have 2 and 3 or 5 year plans that are well laid out and well executed.

What's enlightening is that most individual investors look past that and investigate the company to see if they are well run from their past accomplishments, and are they meeting the goals set a year or two ago.

Wall street isn't happy that Tesla didn't meet THEIR goals. I cry for them.

Tesla is meeting MY goals as a customer, and they have my money as a result. I would say that they are meeting THEIR goals just fine.

2050project | February 20, 2015

@ttitus +1

Most of Wall Street definitely can't see the big picture, but, Morgan Stanley analyst Adam Jonas has been somewhat supportive in the past two years in seeing the bigger picture... and he just delivered another positive outlook for TSLA just yesterday (which helped boost the stock): | February 20, 2015

In order to become a viable (long term) automobile manufacturer I believe that Tesla needs to reach a scale of hundreds of thousands of deliveries per year. Last year they grew about 50% year over year. This year they will grow more than 100% to about 70,000 deliveries. Next year they should be delivering more than 100,000 cars. This is an extraordinary rate of growth but so far they seem capable of sustaining the pace. Having a firm grip on battery technology, supply and cost will solidify their business case. By 2020, if they can keep executing reasonably on time, they will be a profitable player of economic significance (>$20B in annual sales which is more than the Volvo division of Ford for example) in the automobile market and BEVs will be here to stay.

SamO | February 20, 2015

Andrea James also "gets it" even better than Adam Jonas.

TeoTeslaFan | February 20, 2015


Quote (georgehawley): "This year they will grow more than 100% to about 70,000 deliveries."

That's not exactly correct.

Quote (Tesla Motors): In 2015, we expect to deliver about 55,000 Model S and X vehicles, representing more than a 70% increase over 2014 deliveries.

Source: Tesla Q4'14 Shareholder Letter, page 4: | February 20, 2015

Anyone who has spent time on the inside of this process knows the whole quarterly earnings gerbil wheel is such a scam, and a huge distraction from running an actual business. Sure, there are some really smart, hard-working analysts out there, but they are counter-balanced by folks who have never run a business nor often have any domain expertise in the area they are covering coming up with some number that they make up then judge companies against their made-up number.

TSLA is a great example where the lemmings will evaluate the company based on criteria that are completely at odds with the stated direction of company mgmt--the handling of the ~1,400 cars that could not get delivered is a great example. Anyone analyst who considers this a "miss" is an idiot as these cars are all BTO and Tesla will eventually recognize the revenue for them*. These same analysts would be perfectly happy with, say, GM building 1,400 cars and letting them sit on a parking lot somewhere because, "on the books" GM got to recognize the revenue from the cars.


JAD | February 20, 2015

Don't they get Tesla is not trying to be 'profitable'. They are reinvesting any possible profits into R&D, Superchargers and the future of EV's. Not short term cashing out to earn 10% ROI. They are thinking big, Apple big, in ten years.

Gadfly | February 20, 2015

I love my Tesla, but must admit that it's an innovative company that makes a niche product and hasn't yet proven it can make a nickel selling a $100,000 range limited car that appeals to early adopters and has an almost non-existent market share; a money-losing company with wildly diluted shares facing vicious and well-capitalized German, Japanese, Korean, and even American competition with no production capacity constraints in a low-margin industry.

Here is an interesting analysis:

Tesla Prospects

I'll stick with the Asia theme to start off and note that in January 2015, Tesla sold about 120 cars in China. That linked article also notes that "Musk has previously said he expected China sales could rival those in the United States as early as 2015."

The shortfall is important not just because Tesla's market in China is non-existent, but also it shows just how incredibly off the mark Musk was in his prediction. If there is one common theme amongst the Tesla stockholders, it is the unshakable belief in the "Temple of Elon." He is not infallible. As for China, Tesla has, to date, wasted its time and money on the country since 2013 (when orders began there) as it has basically nothing to show for its efforts.

Moving on to some financial considerations, the company is spending money at an alarming rate. For example:

The company spent $970 million in capital expenditures in 2014 while the 2013 capex was $264 million.
A poor Q4 performance saw it post a loss of over $100 million - the loss was nearly $300 million for the full year.
The company burned through a considerable amount of cash in Q4: $465 million.
Long-term debt and "other long-term liabilities" increased from $881 million in 2013 to $3.069 billion in 2014.
In addition to the added debt, Tesla is diluting its stock steadily in order to fund operations (the large steps upward) and pay management (the slower, grinding upward slopes):

TSLA Shares Outstanding Chart

TSLA Shares Outstanding data by YCharts

We can clearly expect to see more dilution and more debt in for the next several years in order to fund operations, capex, and compensation. Elon Musk predicted GAAP profitability in 2020 and I estimate that (if and only if all goes well) Tesla will show solid positive cash flow a year or two before that. Until then Tesla will need a lot of additional financing.

There's nothing wrong, per se, for a company to spend lots of money, incur debt, and even dilute its stock. However, when a company does those things and has a stock price that is (still) quite high and full of expectations, the bar is set extremely high for that company to execute. In other words, Tesla better be spending all that money wisely.

luckyluciano | February 20, 2015

I know we are all fans.....but the stock market is very forward looking, therefore the very high valuation.
traders/investors price in the companies forward guidance, but in the end, an earnings beat is a beat, a miss is a miss and together with guidance it eventually gets factored into the share price.

hillcountryfun | February 20, 2015

ccbldg: Wow!! Thanks -

jwg | February 20, 2015

Without question there is a risk that Tesla could stumble for any number of reasons, due to its own mistakes (problems with upcoming models, serious product flaws resulting in large warranty or recall expenses, a drop-off in demand for current models, etc.), competitive pressures (serious competition from other luxury car makers at lower prices, etc.) or external economic factors (strengthening US dollar killing demand in other markets, another world economic slump, etc.). Nobody knows.... least of all investment bank analysts.

The company has limited financial resources, large spending plans, has acknowledged that money will be running low by the time they are generating free cash flow IF things go according to plan, and there are no guarantees that they would be able to raise enough additional capital on attractive terms if they needed to in the future.

What I take huge comfort in however is that with all of the capital investments they have made and the technology and brand they have developed, that if through a bad sequence of unfortunate events the company did flounder, it appears highly likely to me that at some distressed price either Apple or Google (or whoever) would step up and buy the company, continuing the Tesla brand while using it as a platform for their own vehicle development. At the right price it would simply be cheaper to do that than develop it on their own, and it would give their own efforts a huge jump start. So while I hope it never came to that, I think car owners will never be left high and dry if the company ever ran into problems.

carlk | February 20, 2015

The stock price is always the price where it should be. When people say a stock is over or under valued they forgot that the stock market is forward looking. More importantly they forget the stock market always give the best, not accurate but the best, prediction of a company or the economy than anyone could. The reason is simple. Every pundent or analyst can have a bias or agenda but people who buy stocks will never put their own money in jeopardy. The stock maket is the result of millions of people vote with their own money from every different angle of views. There could be unpredictable things in the future like war or natural disasters but every possible scenario is covered in current prices. It's useless to over-analize and draw any conclusions that is against the market.

And one more comment of the low profit of Tesla and growth companies in general. You can eat your seeds or use it for next year's crop. By definition a growth company is only interested in planting more seeds instead of consume them now.

carlk | February 20, 2015


1BadNerd | February 20, 2015

@carlk, I think, "people who buy stocks will never put their own money in jeopardy," should probably be rephrased as, "people who buy stocks will never knowingly put their own money in jeopardy."

Rocky_H | February 20, 2015

Wow, Gadfly, you don't get it either:
"hasn't yet proven it can make a nickel selling a $100,000 range limited car"
They have greatly increased their volume of cars sold year over year in 2013 and 2014. They have intentionally spent all of that extra revenue in expanding, to maintain a just below break-even financial point. If they had decided to just build and sell the cars in the U.S. and wait on their expansion plans, they could have made a pretty good profit in every single quarter of 2014.

Simply Red | February 20, 2015

Nice little nugget from the past. As many others have done, I thought I'd go back in time to learn more about Tesla (the company), Model S and change. The influence of one particular book in the early 70’s hit a cord when I was young and continues to, quite often, pop into my head. Future Shock, written by Alvin Toffler, focused on the reality of rapid change and how it impacts our daily lives. If interested, this documentary narrated by Orson Wells may bring back memories for some of you (Pan Am, data entry cards, huge computing machines):

But, the main reason I brought this “timely” early thread back was to let the forum users, early participates and newer, continue the commentary on Aaron Schiller’s question. Curious to read comments aged with a different history and today’s perspective of the future of the Tesla Company. For me, a most enjoyable addition to this thread was ccbldg’s historical Tesla timeline. Three from his list are not awards but significant notations. Hopefully, someone can answer my question on the second notation:

- 10/27/10 Tesla Motors Opens Tesla Factory – Home of the Model S $21.00: Interesting, at least to me, is the fact that Aaron’s original question was written only 5 weeks after the Tesla factory opened (Home of the Model S) and the stock price ranged between $21-$30 a share.
- 06/22/12 Model S deliveries begin $33.79: Is this the date of the 1st deliveries of the Model S Signature series?
- 10/09/14 Tesla Motors unveils P85D: AWD and AutoPilot $257.01: Significant changes in technology and in choices we make when ordering.

Lastly, this thread originally generated only four comments and went into hibernation the next day. It now sits at 37 comments. I learned a lot in reading some of the early threads; but what strikes me is how much the Forum has changed!

"Change is the only constant."- Heidi Toffler

carlk | February 21, 2015

@1BadNerd You're right I should have pharased it that way.

Here is one view from a Tesla super bull. It's the most optimistic view of Tesla's future I've heard but wait didn't Elon said the same thing recently too?