With 8 billion in cash, and 3-4 billion per year burn rate, that's a two year buffer assuming no improvement. That doesn't seem like the worst cash crunch of their long life. What am I missing?
Many economic forecasts are saying that a full recovery is 2-4 years away, although there are many different opinions.
You can tax cigarettes all you want, people are still gonna smoke.
That becomes a harder sell when the Model 3 is actually more expensive to operate, as it is in some places now.
Its not that they are buying to save money vs the economical choices, but it does make a difference relative to their comps (RWD & AWD sport sedans).
Before COVID-19 you were buying an EV knowing that there was a roadmap of chargers being rolled out. Now I would be wondering (a) are new ones going to be deployed at all and (b) are existing ones going to be maintained.
Everything non-essential is going to be deprioritised over the coming years.
What I'd really like to know is what will happen to Tesla's vehicles if the company goes under? Like will they get bricked essentially? I sincerely doubt Tesla will go under like that but, I'm curious none the less.
A city that wants to electrify the vehicles driving there could do that very easily by converting a certain percentage of parking spots to EV-only every year. This will roughly ensure (at least) the same percentage of cars in the city being EVs (since if there's more, using a non-EV becomes extremely unattractive as you can't find parking).
BYD did just get the largest electric bus order in history from LA https://t.co/YaWN2ZKtBs?amp=1 as part of a green new deal, so you may not be far off in regards to cities moving towards focusing on accommodating electric vehicles.
Tesla also relies heavily on first-mover advantage to grow. With the virus stalling everything, all the more cash rich automakers get time to catch up on R&D, while Tesla is stalled from being unable to physically expand. Tesla also becomes more cash starved from falling stock prices than other automakers.
Then there's the drop in gasoline prices which naturally makes Tesla much less cost competitive vs ICE vehicles in its major markets (US/China). Added bonus of traditional automakers benefiting from low gasoline prices because historically consumers buy higher margin vehicles (truck/SUVs) when gas prices are low.
So it's multiple various disadvantages hitting Tesla all at once that's likely to continue for a couple of years.
https://europe.autonews.com/automakers/porsche-911-most-prof...
Porsche is Volkswagen's most profitable brand.
Which is pretty ironic, given the whole mess involved with Porsche trying to buy Volkswagen a few years ago.
Ford is in a much worse position than Tesla.
Ford doesn't sell EVs yet. They have the Mach-E starting at $44k for 230mi launching in 2021. That does seem to have higher margins than a $40k Model 3.
This is just wrong. Tesla relies on margin. The other automakers don't make money with their EVs for the most part. They make money with their ICE vehicles.
> all the more cash rich automakers get time to catch up on R&D
Actually all the other automakers are stripping their R&D programs and dropping new EV vehicles to survive.
Plus there's an argument to be made that a company isn't likely to actually run the cash all the way down to zero before waiving the desperation flag (I recall hearing GM had $1-$2 billion in cash when they filed bankruptcy in 2009).
Without knowing what the rest of 2020 demand looks like and the concerns above, the time horizon could easily be cut from your estimated 2 years down to 1. Only one year left to survive is a precarious situation.
Not saying that's guaranteed to happen, but the are plenty of valid concerns one would have as a common stock shareholder.
Cars are so expensive these days, but a $25k compact car is so nice, why pay another $20k for incrementally nicer car?
Keep your Mazda 3 for 10 years. It's a good car.
But I agree, the marginal value of nicer cars is questionable at best. The benefit of a Model 3 was mostly going to be tax rebates and access to the car pool lane for my wife in crowded Los Angeles.
My wife on the other hand would need a career change.
I think ARKinvest's 2024 bull case of $24k/share is correct. And if you don't, I guess we'll just have to wait and see! :grin:
Would love to take the other side of any wager you offer
When you've taken a 25% in income this year, I think many people are going to put a hold on big purchases.
This seems doubtful, I'd be really interested to read any source that advocates that :)
Of course, the Fed should just let bad companies fail! What they're doing will hurt the long-term prospects of the country as money is misallocated in zombie businesses, instead of in promising new companies with better technology.
This makes it even more important to invest in the few companies that are genuinely growing. It keeps you above inflation!
Europe is the world's second biggest car market after China. Volkswagen Group and the Renault-Nissan-Mitsubishi alliance have both sold more BEVs than Tesla in Europe so far this year:
https://twitter.com/auto_schmidt/status/1250880399137529864
Across the course of the next year or two Hyundai Group will also start to sell more BEVs in Europe than Tesla does.
So far in 2020, the Audi e-tron has sold 3 times more in Europe than the Model S and Model X combined and it has also outsold both models globally:
https://ev-sales.blogspot.com/2020/04/europe-march-2020.html
The coronavirus pandemic is going to put a dent in everyone's sales for a few years but BEV production will continue to ramp up. None of this is surprising. They're big car companies and they sell a lot of cars. The same pattern will play out in all markets eventually.
2. Tesla still has a large number of debt payments to make in that time period
3. Cash at the end of quarter is not equivalent to cash during the quarter. Tesla generally optimizes its financials to display a high number for cash at the end of the quarter. If you look at the interest they are getting on savings throughout the quarter, you'll see that the average cash they have in the bank throughout the total quarter is much less than stated value.
If you used conventional metrics their cash is more like $2 BB, and a bunch of that is stuck in China (as in their agreement for Tesla Shanghai stipulates that cash cannot leave the country).
There is a real liquidity problem in there, but the people buying Tesla shares are not exactly the sharpest knives, or they're investing on the Tesla story, not financials.