My understanding is that the majority of his personal net worth is from Tesla (+Solar City) and SpaceX. Would that limit his ability to personally fund Tesla?
Also, much of his liquid pocket money has come from loans backed by his Tesla Stock. This could be a problem if Tesla stock price drops too much, as the stock he has pledge is required to be no less than a multiple of the money he has borrowed. [3]
Disclosure: I am short Tesla.
[1] https://www.cnbc.com/2018/04/13/equidate-spacex-27-billion-v... [2] https://money.usnews.com/investing/stock-market-news/article... [3] https://www.forbes.com/sites/jimcollins/2018/05/18/musk-has-...
You state that he can't buy out Tesla, which is true. But why does he need to buy out Tesla to cover their debt? On the contrary he would need to sell some of his Tesla (and perhaps SpaceX) stock and give the cash to Tesla to cover their debt.
Honestly, on paper there isn't any reason why Tesla can't just sell additional shares to the market in general, not necessarily just to Elon, in order to get enough money to cover their upcoming debt payments. Elon has publicly said he won't sell shares because Tesla won't need the money because it will be profitable[1], but some people are skeptical [2]. Maybe he just doesn't want to walk back his statement?
Also as previously mentioned, he can't sell all of his Tesla stock without paying back some of his personal loans.
[1] https://www.cnbc.com/2018/08/01/musk-says-tesla-wont-be-sell...
[2] https://www.businessinsider.com/teslas-upcoming-debt-payment...
Producing 55k Model 3's per quarter [1] will definitely help with the cash flow situation. I think the biggest questions that determine if they can be self-sustaining are:
- Can they ramp up Model 3 production quickly enough to meet the debt obligations they have accumulated to date?
- What will the average Model 3 margin be, given the price distribution from 60k to 35k?
The bull case [2] aligns with your basic assumptions that the 3 will add significant cash flow that allows them to get over the "debt maturity hump". Note that their analysis does include other sources of cash flow (energy credits, remaining line of credit).
The bear case, basically, disagrees. They suppose that there will not be sufficient demand for the higher end Model 3, given increased competition from vehicles like 2019 Jaguar I-Pace (69.5k, 240mi); Chevy Bolt (37.5k, 235mi); and maybe Hyundai Kona EV (? $, 250 mi). This could then put Tesla into a negative spiral, where shrinking orders cause their accounts payable to not keep up with their lagged accounts receivable.
Also it's worth noting that they are probably on track to spend 2.5B in capital on PP&E this year based on 1.25B in first six months [3], and spent 3.6B, 1.3B, and 1.6B in the previous three years[4]. Adding in another 0.75 - 1.0 in selling/general/admin and R&D costs per quarter, on top of the cost of producing their cars and servicing their debt, makes even the 3B/yr in Model 3 gross profit case less of a slam dunk for Tesla success.
I think it really could go either way at this point, and the next six months will be telling. Elon does has a tendency to just make things work, but I am taking a risk here and siding more with the negative case.
[1] https://www.bloomberg.com/graphics/2018-tesla-tracker/
[2] https://www.cnbc.com/2018/10/09/tesla-on-path-to-profitabili...
The chevy bolt is a great little car, it's just not as a sexy as the m3 (will tesla take this over from bmw's namespace :-)). Of course it's half the price of the current selling model 3's. I think the bolt is a fine car, not too sexy, but sales in the us are anemic, yet people complain they are hard to find. Also gm isn't making many of them, perhaps for same reason as ipace. hyundai kona ev looks like a nice car too.
All those cars are inferior evs to even the model 3, but they aren't that far away. If only they could mass produce them, and the biggie, get auto dealers to try to sell them - that's the part that's really missing so far. It's literally against their own interest at least in the short term to sell evs.
I think you should look out more than 6 months. Tesla has enough customers world wide for the 3 to sell another 100-150k of them - remember they are hardly even selling them in Canada up to now, just recently ramped up. It's only after the pent up demand is handled that we'll know. I'd say look at what q3 and q4 next year do - Tesla sales are set through mid next year just be putting their cars in other countries. The optimistic case if they'll reduce manu. costs and be able to make the base short range model and survive making a 35k car. Meanwhile, and this is the exciting bit, the higher-midrange of bmw, mercedes, audi, maybe low end porsche will face significantly reduced sales because of model 3. Those companies aren't doomed, but the 3 is so awesome, there's so much pent up demand. Even in seattle the sales office was packed last weekend, and they put 100s and 100s of them on the road last month.
I think it's a brilliant way to harvet more money from people and maximize the benefit of the fed tax credit.
I should be honest that I want tesla to succeed because we need aggressive electric car companies to move the whole industry along. I don't want them to fail. I think their business strategy looks better than ever. IF there is a bunch of people, lets say 100k americans who want this car in this range and price, they'll be golden.