Tesla Was Cash Flow Positive Last Week, CEO Musk Says

You don't have to charge your Tesla at the Tesla dealership. And, seriously, if you make dozens of unpredictable stops in your day, I'll grant you, an electric car might not be for you. But, I don't think I've ever made impromptu out-of-city trips with my gas combustion car. That's more a planning thing.

The top post in this thread has a good idea of it—they're producing not only a drastically different drivetrain technology-wise, but also a drastically improved ride, driving experience, and controlling every aspect of the car purchasing, driving, and servicing experience. (And with superchargers, also the refueling experience to a degree).

This is strikingly reminiscent of Apple's model. This is why I made the comparison, and I think it's highly valid. I don't mean to compare their product or level of innovation or even the amount of differentiation. I mean to compare the companies and their models. And I not only believe it's a successful model, I believe it's been proven and will continue to be proven.

If you break it down and look at individual parts in isolation, sure, you can see ways they could be beat. But that's the problem with this way of thinking—Tesla is not breaking it down. They see the whole picture, and that will lead to their success. That's the key.

So tell me, does that still hold water?

Standing still while "the powers that be" catch up seems oddly unlike a company with such an obvious culture of pushing the envelope.

If charge time were reduced to 30 minutes in the general case for electric cars, I'd be much, much more likely to consider them a viable alternative to my current car. We just need the infrastructure. Honestly, I believe that the car that's going to win the transition race is going to be the one that acquires the infrastructure the most quickly, be it electric fast-charging stations, hydrogen refineries/pumping stations, electrically-charged gel stations, or whatever thing we end up thinking up.

There is no reason that the Tesla has to make a value proposition which assumes it wont be paired with a more utilitarian vehicle by buyers. And with the superchargers, you really can drive the SF-LA corridor, which in CA at least, is very very good.

The amount of time spent actually transferring liquid into the tank may only be 5 minutes. But then you need to add the time it takes for your card to authorize, the time it takes to go inside to use the restroom and buy snacks, etc. Then there's time it takes to get on and off the freeway (it always seems like there's a red light at the end of the off-ramp and another one to get out of the gas station). If you stop for fast food, that adds another 10 minutes (30 for a sit-down restaurant). Someone is sure to chime in that a gas car with three drivers and an empty container can drive 23.5 hours per day: I'm sure we've all done that at least once in college, but that mode of transport is much less appealing after one grows up.

My point is just that when all is said and done, the comparison is less like 5 minutes vs. 30 minutes and more like to 25-40 minutes vs. 40-50 minutes. The electric is still slower, but not 6 times slower, and you have an excuse to eat slightly less unhealthy food.

The bobbies patrolling the streets in the U.K. are unarmed but people still seem to respect the rule of law over there, companies can still be seized, etc.

In fact there are probably even a few Western democracies without so much as a military that still could pass laws to nationalize a business.

"Guns" are the least of your problems with government from a day-to-day point of view.

> Then it's not a fair fight anymore

That's missing the point. Government interventions of the type in this thread are aimed at providing a fighting chance for the guy that doesn't have the money for a gym or a trainer, to see if his unorthodox ideas of how to fight will actually prove to be worth anything.

There might very well be arguments against these types of interventions, but it will have to be a different argument than against what we usually consider bailouts.

Bailouts for failed businesses employing well established existing technology is an entirely different beast.

Put another way, if we could pay $50 billion to develop a renewable, clean energy source right now, then it would probably be worth it -- even if it would take Elon Musk only 10 years to do it and for $50 million.

I wish everyone who thought, "I wish people in office were more like me" actually ran for office. That's the best way to get people like you in office. Age requirement for the House is only 25.

Trivially, corporations are amoral entities that have the ability, and sometimes the obligation, to jettison lines of business that lose money or simply don't contribute enough profit, whereas governments often have the legal or moral obligation to maintain or expand "lines of business" whose purpose does not coincide with the generation of cash. Civilization necessitates at least some pursuits that will never make a profit, and governments are the major organizational entities (yes, there are some others) that are often left to such pursuits.

There is a difference between saying that the government should invest in and fund all companies and saying that there are cases where the free market will not act in the national best interest on it's own and the government can. The underlying issue here is that oil is subsidized in the US. It's not just the tax benefits to oil companies, it's all the military spending required to maintain undisrupted oil flow from the most unstable regions in the world. We've gotten to the point where we can't just stop cold turkey; so you've got to invest some money to clean up a mess made in the past. I'd love to get to the point where all our energy choices were on a level playing field so the free market could do the work but that just doesn't seem plausible today.

It's cliche at this point, but the space program and DARPA/ARPA investments led to a lot of the technology that enabled the formation and/or success of companies like Apple and Google.

This is off topic but with regard to your some of your other points, it's completely true that the federal government doesn't have to treat it's debt the same way a household does. That doesn't mean it should spend as much as it wants, but it does mean that it can spend a little more than it brings in forever. By senior equity I meant that the government's claims to profits(taxes) are senior to other equity holders.

If governments should be evaluated in the same way you'd evaluate companies, then companies should be evaluated in the same way you'd evaluate governments. Otherwise you're putting down a double standard.

This isn't necessarily just down to investors being money machines, but in part due to the fact that the global economy is improving but still massively fragile, even if that $500m was split 5 ways, you'd have to convince an investor that $100m in a business that could go belly up is a safe bet, even though the economy could rapidly go wrong and ruin luxury items like electric cars.

Plus lets be honest, if you play it on the investment game there's every risk people will buy in, get cold feet and dump the stock pretty quick, ruining confidence in the business and creating a negative public perception.

I will tack on at the end, I'm not an economist so I could be way, way off base.

Selling a few shares at a time to individuals is a really expensive and time consuming way of raising money, so the only reason to do it is if you can't raise money from larger investors. Now, sometimes there's a non-shady reason for this, but more often than not the reason is that small-scale investors can't afford the same level of due diligence to detect scams and can't afford to take legal action if the whole thing implodes. (We saw this with the Perma-Pave ponzi recently - it took one of the larger investors investigating, finding evidence it was a ponzi, and suing for anything to happen. The smaller investors were stuck flailing around amongst misinformation from people involved in the scam.)

What Tesla is doing is creating an entire new venture from scratch from nothing, for them to hit profitability and make any solid return is likely to take a decade. VCs are unlikely to dump $500m for a 10 year wait, sure they'll know within a few years whether it was a good investment, but it's not likely to be viewed as a safe bet.

Sometimes you need to give optimization systems a hint.

In the U.S.'s case, our government happens to do much more than this, but this is not the core of why government exists.

Exceptions I can think of are cases where individuals don't have enough info to decide (eg, a product will cause cancer, but the company can get rich before consumers find out) and Tragedy of the Commons issues (eg, every individual has incentive to pollute and only collectively do we have incentive to prevent it).

You might argue that the pollution exception applies here, but I'd still want the market involved. For instance, "the government will award $LargeAmountOfMoney to the first company who sells X vehicles meeting the following efficiency requirements..."

Profit is what's called Net Income (for argument's sake, let's do EBIT--Earnings Before Income Taxes). Cash flow is simply your delta in cash from one period to the next.

Lots of things go into net income, but essentially it's revenue minus costs. Because of GAAP (Generally Accepted Accounting Practices--only in the US), you recognize revenue when it is earned not when it is collected. So, let's say you buy a car and you pay $5,000 down on a $30,000 car. The car company records revenue of $30,000. In their balance sheet, they also add $5,000 to cash, and $25,000 to what's called Accounts Receivable. Their cash flow is now $5,000.

Let's further say that they owe payroll, to the tune of $10,000 for that month. And you were the only poor bastard that bought a car from them that month. They have to pay $10,000 in cash for payroll, and that also gets logged as an expense. So, their profit shows a $20,000 net profit, but they have -$5,000 in cash flow.

You can extend the example to make it positive for a company that's not profitable, if you'd like.

So for example, if you look at HP's write down, they were operationally cash flow positive for the quarter but are 'writing off' 8+ billion dollars. So they "lost" over $8B this quarter. Aka not profitable during the quarter.

So the milestones you look for as a company are that you are cash flow positive for the day (all of todays costs covered by revenue), cash flow positive for the quarter (net increase in cash on and over the quarter) and cash flow positive for the year (net cash increase for the year), and finally profitable (total income exceeded all costs, both tangible and intangible (like depreciation)).

http://en.wikipedia.org/wiki/Operating_cash_flow

I really doubt this. This is the classic innovators dilemma. The investments in electric don't look good enough yet for the car companies to go "all in". Their entire supply chain is built around making and selling cars that run on gas engines. Tesla isn't beholden to any kind of entrenched thinking and thus can build up an advantage here that is going to take the big car companies a while to catch up to once electric cars go mainstream. (http://dl.dropbox.com/u/120/Screenshots/innovators_dilemma_c...)

Aren't they already trying to do that? Chevy's Volt, Nissan's Leaf, Ford apparently makes a fully PEV Focus now, as does Honda with a version of the Fit, and Toyota's gotta be working on the Prius...

It's one of the examples of patents being done right, to protect innovation.

That is a disadvantage. Along with their size that represents massive costs and massive inertia.

The actual threat from incumbents is regulation(lobbying for) and legal. Both of which they can afford due to massive size and have established the "infrastructure" for.

Mission accomplished and all that.

My portfolio value, if hedged perfectly and fully backed with cash is now locked to +/- ~20% (depending on IV) at little to no cost.

More here: http://www.investopedia.com/articles/optioninvestor/09/asset... || http://www.theoptionsguide.com/the-collar-strategy.aspx || http://www.theoptionsguide.com/costless-collar.aspx || http://www.advisorperspectives.com/newsletters10/Risk_Manage...

Mark Cuban used this to stay a billionaire through the dot-com crash: https://www.quora.com/How-did-Mark-Cuban-survive-the-dot-com...