Hacker News Reader

Comment by polymatter | Hacker News Reader

> so financially ignorant

I agree, and specifically I think of the confusion between gross profit margin and net operating cashflow. Tesla makes money on every car sold (as they actually have a gross profit) but have been spending cash really fast (as they have a negative cashflow). All this really tells you is that Tesla is investing a lot of money, which is to be expected for a company that is trying to spearhead a paradigm shift within the entire automotive industry.

Also, since one big weakness in Tesla is whether it relies on government subsidies and loans for its continued survival. Thats something I don't understand and if I had a horse in this race, I'd be weary of a company that relies on the whims of political support in order to survive.

View on HN

Something is pushing this "Tesla loses money" angle hard. Since I bought mine, I've discovered that a lot of people who know very little about the company "know" that they make a loss on every car sold.

Regarding subsidies, the "good" news there is that at least in the US, there isn't much in the way of uncertainty, because the US federal subsidy starts to drop off at 200,000 units per manufacturer and is unlikely to be expanded. Given how quickly they're moving, they'll probably hit that within the next few years and one way or another they'll have to learn to do without. But at least they won't be waiting for politicians to drop the knife on them.

>"Tesla makes money on every car sold (as they actually have a gross profit)"

You knock people for financial ignorance, then say this?

You realize that gross margin is sales less cost of goods sold? And that cost of goods does not include things like paying your employees, interest on debt used to expand, the cost of running the factories, etc etc?

I come from a retail environment where our gross margin is typically 25-35%, while our profit margin is about 2-4%. So saying that Tesla "makes money on every car sold" simply because they have "gross profit" is about as fast and loose with "profit" as you can get. Of course, nobody in the finance world would think that...

Having a gross profit is not the same thing as making money on every car sold because gross profits don't include a whole bunch of per-unit costs like sales staff, shipping, after-sales support, repairs and recalls, etc - basically, any costs incurred after the moment the car rolls off the production line aren't included.

Reply on news.ycombinator.com