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Responsible cash management and investor relations are not mutually exclusive with innovation. There is absolutely no reason that TSLA shouldn't have raised cash with a relatively inexpensive bond issuance or moderate share issuance in the lead-up to the large expenditures required to begin Model 3 production.

As a consequence of this, analysts rightly discounted TSLA's stock price to account for the tremendous amount of risk he was taking by operating with little-to-no room for error. The fact that he was able to operate inside of that slim margin does not indicate that he should have.

Elon himself was so flustered by the consequences of his poor cash management (and resulting discount in the stock price) that he ended up plainly manipulating the stock price and nearly got himself banned as a D&O of a publicly-held company.

I'm tired of all of this hero-worship, and the smug "this is what it takes to change the world" discussion around his insane actions. The innovation and change brought about by the Model 3 is not a good excuse for Elon nearly killing the company to maintain his pride.

Last, the fact that raising money to ensure the financial stability of the company is seen as a pride-diminishing act by Elon is in itself worrying.

> As a consequence of this, analysts rightly discounted TSLA's stock price

TIL some of the wildest, most speculative short selling in history is "rightly discounting" a stock price.

That's revisionist. I mean, yes, you're right that they could have operated more in line with traditional accounting. But that's not why their stock price was held incorrectly low.

There were plenty of reasonably thought-out cases to short Tesla, and there may still be. The company has had numerous recent instances where they've failed to pay vendors and their runway was shortening at a concerning pace. These are legitimate reasons to short a company's stock if you find them persuasive.

I don't disagree that there was some wild speculation, sensationalistic articles, etc., but that doesn't make all short sellers wrong for believing that the price is inflated.

Last, who's to say that the price was incorrectly low? Was it incorrectly high before? Is today's price the right price? I do not believe that there was some conspiracy to artificially depress the price of the stock if that is what you mean.

> Last, who's to say that the price was incorrectly low?

Uh... you. Because you're the one who introduced the "rightly discounting" nonsense that I was arguing with. Clearly you have an idea of what the stock price "should" be because otherwise there would be no "right" in your "rightly", right?

You just don't agree with the price the market has picked NOW, when you thought the price it had THEN was just fine. And you're reaching for stuff like "accounting norms" as justification, when the real truth is that, no, TSLA was artificially low due to short selling.

It is true that his actions were kind of reckless, plus, I agree that the hero worship must stop. He could've done it better, but it is a good sign that it all worked out well.

I also think that this will serve as a base for Tesla. The first few profitable products are the hardest to produce. If they launch an even affordable version, they'll be able to manyfacture in bulk and not he stuck in "production hell".

I don't know if I am mis informed, but I've always thought about the analysts as someone who, I don't know, are kind of traditionalst people. They might not be, that's just my perception.

I'm very happy that Tesla broke even, just look at a few months back. Who would've thought this would happen? I would read an article a day saying Tesla will go bankrupt, but now they are making more number of cars and cash. The main advantage Tesla had was that ither manufacturers are busy milking ICE engines.

JLR recently, said that they plan to go all electric in 2025, they are doing it NOW!!!! I'm an investor in JLR's parent org and its insane that JLR didn't think of this switch before it got burned down due to low sales in China! This is like a governmental response. Slowly and reactionary

There are a number of things here that I would quibble with:

1) There are absolutely reasons you can't raise cash with relatively inexpensive bond insurance, or by equity based capitalization. Investors get unhappy, and your bond ratings degrade. Bonds often are secured, so you can't just shaft investors by driving down the stock price.

2) Tesla's stock price is in no way discounted by standards of car companies - just startups. It's also the most shorted stock on the face of the planet - I suspect that has much more to do with volatility and downward pressure.

3) Your interpretation is "flustered" and "consequences". All sides agree that there were discussions prior to the tweet, but that the statement implied things that it ought not (Funding secured). This was a poor tweet, poorly though out. You bought into the conspiracy theory - that this author debunked - that cash management was a problem, and Tesla was about to go broke, so flustered desperate tweet. I think we can safely discount that, given the current results.

The rest of your argument is basically emotional attacks, so forgive me if I choose to ignore that.

All that said, I think Tesla will benefit by better governance - having a separate chairman role. This is just a good idea for all corporations.

1) I agree that it can cost a material amount to raise money in any manner, be it debt or equity. That said, Tesla was in an okay place to raise money after the success of Models S and X, and had all of the information to reasonably project that spending on Model 3 production would outstrip inflows from existing sales to a degree that could put the company's finances in a relatively precarious state. They were not reasonably inhibited from raising further cash to justify not doing so prior to ramping Model 3 production.

2) You're right, by car manufacturer standards the company is trading at an incredible premium, I should have been more clear. I meant discounted in the sense that "the street" marked their targets on Tesla down from where they had been as a result of these financial concerns.

3) The term "discussions" may even be too strong for the few conversations that occurred prior to the tweet. It was incredibly irresponsible, and it's somewhat difficult to interpret his intent as anything but to manipulate the stock price and punish short sellers.

The author did not debunk the claim that cash management was a problem. Cash management was a problem and may continue to be a problem in the future. Rapid cost-cutting and non-payment to vendors seems indicative of poor cash management to me. Anytime that a company's runway becomes a relevant part of an objective analysis, there are cash issues. Tesla did not need to give cause for investors to call into question its financial stability in order to make the Model 3.

Don't get me wrong, I want Tesla to thrive. It just seems as though many of these issues of financial stability need not have occurred. I agree that better governance is in order and that Tesla and many other organizations can benefit from a greater degree of independent oversight.

1) Yep, and anyone who has worked in a startup knows that these are "bet the company" moments. They had to ramp to model 3, they thought they gave themselves enough room. Turns out the engineering on factories were wrong - in particular Panasonic fscked up the battery assembly system and Tesla screwed up by over automating. That made it closer then they should have.

2) I've never thought that anything the street did around Tesla was rational. I just watched Mark Speigal still hold on to his position that Tesla is doomed.

3) I agree it was irresponsible - but I also disagree with your thesis that it was manipulation. Elon had access to the sales number, and the ramp. He didn't need tweet to inflate the stock - that would have happened (with a much larger market cap then today) at the end of the quarter. That just puts it back to twitter induced stupidity.

Thanks for the well-reasoned response here. I think we are agreed on Tesla governance going forward. I am really praying that the Mullally runner is correct. That would make me a very happy camper.

1) I agree that there are certain instances, especially in startup-land, where we have to bet the company. Lord knows I've had to do it with the company I'm a part of. That said, I don't think that this was one of those moments.

2) I've worked intimately with both buy and sell side clients, so I have pretty good first-hand knowledge of analysts on "the street". I can confirm to you that they are as irrational and misinformed as much of the general public. Bringing attention to themselves and their firms plays a big role in what they say/do. I agree that there has been a ton of irrational work done on Tesla, but I think that a reduction in target prices to reflect the company's financial state was reasonable.

3) I think we both just see this very differently.

I agree on Mulally, that would be great. Thanks for the detailed responses and thoughtful back-and-forth.

There is absolutely no reason that TSLA shouldn't have raised cash with a relatively inexpensive bond issuance or moderate share issuance in the lead-up to the large expenditures required to begin Model 3 production.

Well, apart from the fact that TSLA already has $10b of Debt to pay back over the next few-to-ten years. I believe Tesla did borrow heavily to begin Model 3 production, but then production took longer than expected to get off the ground and Musk decided it was now or never and that they would try to break even with what they had rather than taking on even more debt. At some point they had to demonstrate they could make money, and they've already left it a long time. I'm very glad that it looks like they're going to pull it off.

The best part about this moment right now is if TSLA immediately starts looking into restructuring their debt while interest rates haven't taken off and while everyone is excited again about TSLA's future. Seems to me this would be a savvy time to milk the market and roll over all their non-optimal debt.

I can't be too specific but the conversations I've had with Tesla's competitors show they're terrified.

No matter what competitors say in the press, Tesla is transforming the auto industry in two fundamental ways that traditional car companies cannot adopt quickly. As easy as everyone makes electric cars and online ordering seem, Tesla's competitors are finding this challenging. The auto manufacturers must build a really great electric car and, at the same time, cut out the dealerships.

The next ten years is going to be very interesting.

Clearly you're being downvoted because of lacking source or specifics, but also, there are public statements of terror and confusion from competitors you could be referencing.

Musk plays fast and loose like he's almost asking for failure. The amount of blog posts and confused short-sellers because of this one fact have been truly entertaining/infuriating to watch.

Like when everyone thought they had won by removing him from the board of Tesla. Musk could eat Ramen in a 400sq ft apartment without a cent to his name, scheming on his next startup, and still be happy. They are fighting a strawman to death.

You can't win against this guy until you prove him wrong. Either they can't or aren't incentivized to do so, so he still wins.

The problem is that he plays like he has nothing to lose.

He has a vision and a plan and he is willing to put everything on the line and sacrifice it all in the pursuit of that objective. He's a problem solver. He's not scared of being unpredictable. He's creative as fuck. He will do whatever he has to do to achieve his vision.

He didn't make his plan haphazardly or on a whim. He made it having observed millions of other people play this game and seeing how the market reacted to their playbooks. He developed his own playbook based on what he's seen win and lose thousands of times in the past 50 years.

If anyone thinks he didn't study every other car manufacturer intensely before he decided he could do a better job, they're foolish. Musk is an intelligent man. He doesn't go off half cocked just because he's an arrogant fucker (although, I'm not arguing that he isn't), he sees a path that nobody else is seeing and he's steering his companies along that path to greatness and profit by changing the world for the better.

"It’s one of the characteristics of a leader that he not doubt for one moment the capacity of the people he’s leading to realize whatever he’s dreaming." - Benjamin Zander

You cannot fight and win with someone like that. That's the kind of mentality that will either change the world for the better or destroy it. You'd better hope he's on your side.

From one POV, Musk really has nothing to lose.

Even if all his companies crash and burn, he has taken a lot of resources and spent them on things that matter: space exploration, combating global warming, etc

No matter what happens, all that engineering talent will continue to exist. All that experience gained still exists. And some of the giant infrastructure that he’s built will inevitably be reused if his companies don’t work out.

I feel like he’s exploiting the capitalist system to get stuff done, and I think he is prepared for everything to collapse because much of what he has created will survive no matter what. Who cares about the numbers on some balance sheet now that we can reuse spacecraft and build great electric cars? Those numbers are a drop in the ocean anyhows.

Agreeing with both of you but want to chime in with some conspiracy theory stuff.

The only way you beat Musk is by going somewhere that his idealism won't allow him to go, while still maintaining positive public opinion of yourself as his competitor.

I am looking directly at the Oil and Big Auto companies when I say people have incentivized bloggers (aka "journalists") and paid online trolls to make him look like the bad guy, and that they will likely then go a "step too far" in order to beat him. His Twitter tirades have either been a poor attempt at refuting this, or a game of chicken on that front as well.

Oil and Big Auto do have something to lose. Musk's bet is also on human goodness, that greater society will allow him to win because he is genuine. That whole "the truth will come out" or "good always wins in the end" trope.

One could easily see him in an orange jumpsuit one day just for daring to upset industries that have created so much evil.

> I am looking directly at the Oil and Big Auto companies when I say people have incentivized bloggers (aka "journalists") and paid online trolls to make him look like the bad guy

They made him spout off about the Thailand-based diver being a paedophile? He bought this stuff on himself, you don't need a conspiracy to explain why the shine came off.

Who gives a shit, really? It’s the same sort of navel-gazing as caring about who is feuding with who in the celebrity world, amplified by a press that’s starving for new sources of clickbait. Yeah, he shouldn’t have done that, but in the final calculus, it’s incredibly insignificant compared to what he’s done and what he’s trying to do.

If you try to run two companies and sleep for 4-5 hours a night for years and take too much ambien, I can guarantee you that you’re going to have a bad stretch too. I think we can cut him some slack.

> Who gives a shit, really?

People who may be concerned that a CEO is trying to run two companies and sleep for 4-5 hours a night for years and take too much ambien and may have impaired judgement.

The issue with that trope is that while Musk's bet on good always winning in the end, that may not be for many generations.

We're still fighting for an equality that's been fought for thousands of years. Fanatical Muslims fighting against Fanatical Christians as a facade covering a war for resources. Who is good? Who is bad? Are either one really any worse than the other?

I'm hoping that his bet moves us towards a more utopian society.

Sadly, while I'm an optimist, my cynicism prevents me from believing that humanity will allow us to get there.

The winners are the ones that write the history books, while the losers are painted to be evil, if they're even included in the history books at all. Some are even written out of the history books and not taught in schools in the hope that in a generation or two they're forgotten.

Humanity doesn't exactly have a very inspiring track record when it comes to good always winning... in fact, its track record is pretty abysmal.

And that matters. In the grand scheme of things. That may be all that matters.

For that, I take my hat off to him.

He didn't really make "efficient financing" part of his portfolio of obsessions until recently. That's why suddenly the Musk magic/insanity began applying to doing more with amazingly less on the financial side.

> [.. tesla has .. ] 60% of world wide lithium battery capacity

This is completely untrue [1]. You are also making this claim in other comments. Lets root for Tesla, EVs and world peace, but stick to the facts.

[1] https://www.economist.com/graphic-detail/2017/08/14/the-grow...

The source here was the Tesla call yesterday... I suspect they overstated it - meant more then half of world wide car batter capacity?

> hyperbolic VW statements about "delivering a car as good as any Tesla at half the cost" this morning.

This while launching yet another compact SUV, based on the Polo platform w/o 4wd and the the base model using a three-cylinder one liter engne. Give me a break VW.

So, another Polo model then.

Is it called an SUV, interested to see.

It's called T-Cross and it's probably intended as competition for the Citroen C3 Aircross. It's not a real SUV anyway, but more like the Seat Arona 2wd raised platform.

I'm no expert on Tesla's economics, but on the "running close to the edge" point I would think it's not about being forced to be there, it's just the leadership trying to innovate as much as possible for each of its products -- the result of which being close to the edge is. In other words: they could have spent much less -- but why not do as much as possible if you know you'll survive. This strategy might, of course, back-fire if you fly too close to the sun but thus far it apparently hasn't. And now is payoff time I guess :)

They are lucky and capable enough to pull this ou5 that's why it is a good time for them. If even one thing had gone wrong they'd be in big trouble.

I don't really agree with you. I think there were a million things to do, and in how many you can try something new and untested depends on how much buffer you have. Some of these new things come in batches, like the automation thing they tried with Model 3 that didn't work out and was reverted. And even this was probably a calculated risk.

Wasn't it my point? They took a big risk and they are lucky it worked out well for them!

>You can see this in how ArianneSpace and ULA are trying to get to their next generation of vehicles (which won't be competitive in terms of re-usability)

Arianespace is a company run by bureaucrats. Incredibly frustrating environment. If you ever thought space was exciting, Arianespace will suck the life out of you. Even the areas where the top management know they need deep and impactful change, they'll bring in an outsider or two to bring "a new vision", then tell the outsider to keep working with all the old people who've built their mini-empire around methods that make no sense and keep them in a perpetual state of "irreplaceable ball and chain" on the company.

I'm not convinced about the multi year advantage. Everyone else has EVs out. They are not pushing them, probably because they are reaping the profits on past ICE investments, but the next tech platforms under development for years now at VW/Mercedes/BMW are electric.

VW is planning to get to 10 million EVs by 2022. I'd give credit to Musk and Tesla for bringing forward this point by several years, but it would be silly to write that goal off as empty bluster. (After all they have been selling a well reviewed plug in electric vehicle since 2014, even if no one ever heard about it, and it was priced relatively high. Maybe so as to not interfere with ICE profits).

But no one else is mass producing EV's. VW is just starting to talk about building a gigafactory. Everyone is doing a lot of talking, but they are all years behind Tesla. And even if they stop talking and start doing, they'll need to build a more compelling product than Tesla. That will be very very difficult. Tesla FTW.

"Chinese sales of domestically-built new energy vehicles in 2017 totaled 777,000 units"

To first approximation none of these were Teslas. EVs are being mass produced.

Mass producing a car might be difficult. But the others manufacturers are already doing that.

They need to figure out how to mass produce electronic drive trains (vastly simpler than what they are building now) and batteries. Batterys are more complex, but most of battery production coming online in the next years is Chinese. Tesla is a fraction of what the Chinese are bringing online.

I don't see any reason why Teslas long term potential should be higher than, say BMWs. Mind you, creating a BMW size company from scratch while driving the electric transition and a pace faster than we otherwise could have hoped for are amazing achievements.

> Chinese sales of domestically-built new energy vehicles in 2017 totaled 777,000 units

Those are gasoline electric hybrids, no more impressive than a Prius technologically from a decade ago that has been brought down in price.

China is not mass producing EVs, which is why it's 777,000 "new energy vehicles." That phrasing is the give-away. Otherwise we could just pretend the Prius was the first mass produced EV, when it was not.

You are right that this figure includes hybrids (PHEV), but the vast majority, 652.000, are pure battery (BEV):

https://en.wikipedia.org/wiki/New_energy_vehicles_in_China#/...

I did check that before but copy pasted the wrong line.

yes they are. in a recent trip to china nearly all of my didi trips were in electric vehicles from two or three different manufacturers. all of these cars were nice but clearly affordable. and as the other commenter pointed out, china still sells more electric vehicles than anyone else in the world. china also has a high-end electric vehicle maker in nio.

It's not just talk. Several projects have already started in Europe. Some of them have former Tesla executives.

Tesla owns the patents and innovates only in the battery packs. The battery cell technology is owned by Panasonic.

South Korean, Japanese and Chinese are leading in battery cell technology and not all of them are teaming with Tesla.

And how will you charge them for road trips, on Tesla's supercharging network? It takes time to build up the network.

The way Nissan did < Dealers.

Also, car companies can get together and let their cars charge at each other’s dealers. Then lock out Teslas until TSLA agrees to join.

Also, gas stations don’t make money selling gas (!!) but by selling candy [1]They couldn’t care less if they’re charging $60 to fill your car or 0.60. In fact, the longer it takes to charge your car unattended the more Andy you’ll buy

[1] source: talk by Exxon-Mobile VP at my univ. back in ‘08 (?)

It's the other car dealers who will have to pay Tesla. T has the best chargers and all over the places you want them to be. T can already use all the other charging standards but they can't use Tesla chargers.

Profit is from cigarettes. Source: friend who buys gas stations.

The head start for charging in Europe is considerably less than in the US. Plus there are _many_ players building up charging networks all over Europe.

China seems to already have a charging network that does not include Tesla at all.

From a purely US point of view it might look like Tesla is the only game in town for the foreseeable future. In European cities I have seen more Car2go electric vehicles/charging stations than Teslas.

Rent an ICE car for the couple of times a year I take a road trip. The other 350+ days a year, I can use my electric vehicle just fine.

I hear this a lot, but it's always (necessarily?) very vague. What scenario(s) are insufficiently affected by the first mover advantage? Define the scenario(s), define "insufficiently", define first mover/head start.

> VW is planning to get to 10 million EVs by 2022.

They say, as they discontinued production of VW eGolfs.

Which related company recently launched an electric car? How many pre orders did they get?

I'd love to see Tesla succeed, but cynical part of me thinks that old stogy BigAuto is simply watching them and taking notes. Waiting for Tesla to take all the arrows and blaze the trail, and then they'll swoop in and copy once Tesla's done all the hard work for them. They're not creative enough to do a Model 3, but once the formula looks sound, they can slap together a half-assed version and flood the market with it.

I heard the same arguments about SpaceX though. Building new cars are large, complex engineering projects, that have insane complexity around operations, manufacturing and technology. Plus things like Brand awareness and identity.

So image that GM wants to really compete with Tesla. They want to go Electric only. How do they: 1) Deal with dealers - which aare independent, and have their own view as to the product mix? 2) Develop efficient batteries and capacities - Tesla has a insane percentage of this capacity right now. 3) Deal with their unions, who definitely have a opinion about things, and are not going to let the company try anything new without their blessing and buy in? 4) Change their marketing image / brand identity? 5) Develop a electric drive-chain that is as efficient as what Tesla has? 6) Develop a network of chargers?

All without taking their current business model?

Note, VW really is trying to do it this way, and I am very skeptical. There are already a lot of signals that their plans are foundering despite a lot of hype around their battery contracts for example, they had to change tact yesterday and announce their own Giga-factory. Nevermind that VW's brand in the US is just slightly north of Enron's.

That's the US, but the charger network argument for example looks very different in Europe or China.

And while Tesla has a good share of current capacity, the amount of capacity that is being built and will come online in China over the next few years is many times larger than what we have right now. Further, while European manufacturers and industry threw away a healthy position in battery R&D over the last decade or so, there is every indication that they are correcting this mistake. Whatever is going to succeed as the post Lithium-Ion tech might well not come out of Teslas labs.

Tesla is already ~2% of US car sales based on their current rate. BigAuto does not have that much room to swoop in and they don't have much time as they need vast infrastructure for battery manufacturing or a charging network among other things. My guess is we are going to see a round of car companies fail as not all are going to make the jump.

Considering they don't sell pickup trucks, vans, etc things look even worse for existing companies. Who also have legacy concerns like dealerships and pension obligations dragging things down.

PS: ~30k/month * 12 months / (0.02) = 18 million per year. (Though not all these sales are in the US.)