Tesla’s Burning Through Nearly Half a Million Dollars Every Hour | Hacker News Reader

Tesla’s Burning Through Nearly Half a Million Dollars Every Hour

bloomberg.com

I'm getting a little tired of these "burning through money" reports. Of course they're burning through money. They're setting up a factory that is planned to produce 5000 cars a week. This costs a lot of capex money up-front, and is a standard thing for any car manufacturer to do. They have to buy tens of thousands of expensive parts, resources, robots, pay all the staff, all while not selling very many cars while the ramp up is ongoing.

"By this calculation, Tesla would exhaust cash on Aug. 6". This is assuming they keep on selling any or negligible amount of Model 3's. Even if they only sell 100k Model 3 cars next year, their revenue will increase by $3.4B. Their aim is to sell 250k cars next year. They're a couple of months late. Shouldn't be a big deal though..

Bottom line: You have to spend money to make money. This is totally normal and expected. No need to worry unless the ramp up totally shuts down.

It's financial capitalist ideology. They're actually investing in capital to actually do things in real three-dimensional reality. That's bad business. You're supposed to liquidate, outsource, arbitrage, make money off credit schemes, and otherwise just move money around.

I understand your tongue in cheek jest about the typical MBA strategy for pumping and dumping the value in a business so that they can get their quarterly performance bonuses or cash of future equity today (and then exit the stage before the business crashes in to a fireball of liquidation)...

Long term strategy used to be what //investing// was actually about.

"about the typical MBA strategy for pumping and dumping"

There is nothing typically - or even remotely 'MBA' about this statement.

This is true, but they issued all forms of debt already - shares, bonds, you name it. Any further delays and they can literally go bankrupt. And this is physical manufacturing do you can't ship beta and fix later for most things. Also many have vested interests to see them fail - short traders, other car manufacturers, oil industry. I wouldn't rule out a simple sabotage - seems fairly low risk if it means oil industry can keep extracting profits for 10 years longer.

Three months ago they were oversubscribed for their debt offering. It might cost a little higher rate, but if they need more money they can get it and they're not going bankrupt. The well isn't dry.

To put numbers on it, Tesla projects by end of next year to be producing 10,000 Model 3 a week at an average price of $42,500 with 25% gross margins. That is $106,250,000 per week in gross profits.

Over 50 weeks, that's 5.3B in gross profits and over 21B in revenue.

They have high SG&A relative to other automakers, but there will be plenty of cash flow to fund further ambitions and pay off the debt it took to get them there unless they're grossly overstating profitability, capacity, or demand.

Producing is not same as profits, sure it can be considered assets in form of "finished goods" but not real profit until they sell all the cars.

What issues have been reported so far other than production bottlenecks?

they just borrow to pay off and set their debt deadline further back a bit.

They're setting up a factory that is planned to produce 5000 cars a week.

It's only produced about 500 Model 3 cars total so far. Total, not per week. The financial press is getting worried.[1] Tesla has very serious production problems. They thought they could bring up a high-volume production line much faster than the big auto companies do. They can't.

Tesla might end up being acquired by some company that knows how to run an auto plant.

[1] http://www.businessinsider.com/tesla-semi-truck-model-3-woes...

It's surprising how little of a lift TSLA got after Elon pulled out all the stops to pump the stock ahead of the inevitable secondary sales. It's going to be increasingly dilutive if investors aren't buying the Elon magic anymore.

Releasing the new Roadster was a mistake I believe, when they are having a hard time with the Model 3. It's not a sign of strength that the company is not focusing 100% on the car that is going to (supposedly) make them profitable.

It wasn't really a release, more like an announcement.

He has to keep the Magic going - without the Magic, they would have been dead long ago. They are dependent on it to sustain crazy valuations.

Maybe saving either the truck or roadster for the next show would have been keen though :)

I mean, these are cars, not like some little Apple software feature ...

I feel its too diversionary. The Model 3 has immense magic to everyone, car buyers, investors, futurists, the fate of Tesla itself.... Smoke and mirrors don't work when you know its smoke and mirrors.

I think you're right. I don't think anything could be more persuasive then delivering on the Model 3 promises and bringing in cash. Relying on, as you say, smoke and mirrors, kind of admits the fact that they're struggling keeping the promise made with the Model 3, so they're changing the topic to a new promise.

"Smoke and mirrors don't work when you know its smoke and mirrors."

Smoke and mirrors has been their game plan for 10 years.

They would not have been able to raise debt and equity without it - not get away with massive delays.

People have to 'believe in the future' of Tesla - and to believe there is a lot just past the horizon.

Without major announcements, they don't get any great PR either.

Though you guys are 100% correct in reality - that's a little too much rationality for pop culture investing.

Personally, I would have announced the Truck - because so many autonomous folks predict that's where the initial disruptions will be and it's a whole other industry.

> Smoke and mirrors don't work when you know its smoke and mirrors.

Yes, they do. In many ways, Trump demonstrated this: smoke and mirrors still leaves people free to imagine what is behind the smoke and mirrors, and they can easily fall into the trap of filling it with what they want to be there. People of radically different preferences rationalized Trump's shifting and incoherent campaign message as smoke and mirrors hiding the policy positions they preferred; the same can (and does) happen in business.

How does this compare to the amount of money each of Google, Microsoft, Facebook and Apple burn every hour? Just the salaries alone must be phenomenal.

What's the news here?

> How does this compare to the amount of money each of Google, Microsoft, Facebook and Apple burn every hour?

Microsoft, Google, Facebook, and Apple MAKE money. By the measurements of this article, Microsoft would have made $3-million per hour, every hour the last quarter.

Tesla is losing money, every quarter with exception of 2016 Q3. https://assets.bwbx.io/images/users/iqjWHBFdfxIU/ihSotBPE7Cv...

The difference is that the companies you listed have very high free cash flow. Tesla on the other hand is free cash flow negative. https://www.investopedia.com/terms/f/freecashflow.asp

You do understand burning is not same as spending? Burning means they are in negative after everything has been considered. So, Google et al. might be spending on salaries but net positive when considered profits ie not burning money.

This is so stupid. Flagged. "Let's take the amount they've spent over the last quarter and divide by the number of hours to get a click-bait headline. Wow!"

This isn't the money they "spent" in a quarter.

This is the money they've spent AND the money they've made added together, and THEN divided by last quarter.

That really doesn't change anything about this being clickbait nonsense. Their quarterly losses are already well known. Rephrasing the numbers in a different context to make them sound more alarming is textbook clickbait.

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