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Comment by toomuchtodo | Hacker News Reader

I wouldn’t discount hundreds of millions of dollars in free cash flow. They have a product that is in heavy demand.

I’ve been hearing about the death of Tesla for almost 10 years. It’s getting old.

I mean don’t they still make a loss on every car. They have been alive for the duration of the stock market bull run. being sceptical of their chances in a recession is normal.

The cars are not produced at a loss. Each car is profit. The negative cash flow is created by investing heavily in factory expansion like the model 3/Y production line and the record time construction of gigafactory 3.

More about profit margins in second quarter report. It seems it is currently 19% per car. https://ir.tesla.com/static-files/1e70a30c-20a7-48b3-a1f6-69...

The cars are not produced at a loss. Each car is profit.

Only under magical unicorn fantasy accounting. Under the same accounting standards every other car maker uses (GAAP), Tesla still loses money on each car.

From Tesla's own financial report:

"excluding regulatory credit revenue, automotive gross margin improved by ~200bp (compared to a decrease of 125bp on a GAAP basis). [emphasis added]

"Fantasy" number is 19% gross margin. GAAP number is 15% gross margin. Still positive.

Totally false on both counts.

1) Tesla's GAAP gross margin was (positive) 14.5% for the most recent quarter [https://ir.tesla.com/static-files/1e70a30c-20a7-48b3-a1f6-69...]

2) Breaking out GAAP and non-GAAP figures is totally standard and commonplace among publicly traded companies. Take a look at Ford's Q2 letter, for example, which has a whole page describing why they use Non-GAAP financial measures to supplement GAAP figures [https://s22.q4cdn.com/857684434/files/doc_financials/2019/q2...]

As of August 2018 that appears to not be the case:

  Tesla says that the Model 3’s gross margin “should grow significantly” to approximately 15 percent in the third quarter and 20 percent in fourth quarter, thanks to “continued reduction in manufacturing costs and to some extent an improving mix.” From here on out, CEO Elon said during a call with analysts Wednesday evening, “the goal is to be profitable and cash flow positive every quarter going forward.”

Source: https://www.theverge.com/2018/8/1/17639588/tesla-earning-q2-...

Last quarter's gross margin was 15%. Given that the small number of Model S and X's probably have much better margins, the Model 3 margin is below 15%, but probably not much below.

https://ycharts.com/companies/TSLA/gross_profit_margin

>Tesla says that the Model 3’s gross margin “should grow significantly” to approximately 15 percent in the third quarter and 20 percent in fourth quarter, thanks to “continued reduction in manufacturing costs and to some extent an improving mix.” From here on out, CEO Elon said during a call with analysts Wednesday evening, “the goal is to be profitable and cash flow positive every quarter going forward.”

Please do not quote by using a code box. Use italics (put an asterisk on either end) or a carrot > to indicate a quote, rather than creating a endlessly long sideways scroller.

Important caveat: this is under Tesla's made-up accounting rubric. Under GAAP accounting (i.e., the standardized accounting methods everyone else uses) they lose money on each car, i.e., they have a negative gross margin.

This should be upvoted to the top of the page.

I'm not rooting against or for Tesla, but they are extra shady regarding accounting. They are losing money on each car. There is so much misinformation around this pushed by Tesla fans and the company itself though that you might easily believe they are profitable, but they are not!

Totally false on both counts.

1) Tesla's GAAP gross margin was 14.5% for the most recent quarter [https://ir.tesla.com/static-files/1e70a30c-20a7-48b3-a1f6-69...]

2) Breaking out GAAP and non-GAAP figures is totally standard and commonplace among publicly traded companies. Take a look at Ford's Q2 letter, for example, which includes a whole page describing how and why they use Non-GAAP financial measures to supplement GAAP figures [https://s22.q4cdn.com/857684434/files/doc_financials/2019/q2...]

GAAP gross margin last quarter is 15% versus the 19% "made-up" number they quote in their press release. It's not negative.

Tesla's Gross Margin is 15%, the same as Ford's. They make a sizable profit on every car. R&D etc is what turns that profit into a loss.

Yeah, that keeps getting repeated by the anti-Tesla crowd. But they make a great profit on every car, and have consistently keep growing in sales.

Right now they just can't manufacture the cars fast enough for the demand. They'll have to keep building factories which takes a big chunk from their cash.

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