How much of Tesla's losses are caused by spending money on continuous expansion of manufacturing capacity?
I've always thought that FUD regarding Tesla is mostly caused by short-sightedness and that they're not profitable because every dollar they make is going towards expansion.
A lot of Tesla's cash goes toward covering Elon's mistakes, like: the unused billion-dollar-plus "alien dreadnought" manufacturing line gathering dust, the SEC settlements, spending on SolarCity and BoringCo, Elon's hundreds of flights each year, purchasing hundreds of auto trailers for deliveries because Elon goofed on the logistics schedule, last-minute storage in port because Elon goofed on the basic paperwork, parking lots near their factory to storage unsold cars or cars awaiting replacement parts, shrinkage due to repairing/replacing parts on the factory line because they were broken or improperly installed the first time around because Elon doesn't believe in letting employees having time to do things properly.
Very little of their cash actually goes to expansion of manufacturing.
Boring Co uses Tesla's lot as its base of operations, and a number of its engineers are actually just Tesla engineers pulling double duty (without extra pay). Also, BoringCo's PR staff is just Tesla's PR staff. BoringCo doesn't really have much in the way of its own assets except for TBM.
You mean Elon, the CEO, is overseeing logistics planning and customs himself? That would be insane.
And is there an inactive manufacturing line gathering dust? I was under the impression it is the same line in use right now, they just cut back on automation. The rest you mention seems like pocket money compared to the company's operating expenses.
Capex spending in the current quarter won't show up in the income statement, but past capital spending will be depreciated in future income statements.
Tesla depreciated about $467 million in the current quarter.
Right, but depreciation means you're accounting for the cost of yesterday's factory as you use it. If that gives you a loss, it's because your business is genuinely unprofitable.
Ramping up manufacturing is hard on CF, but not intrinsically hard on P&L.
Q1 2019 had a CapEx of $279 Million. In contrast, Q1 2018 was a CapEx of $655 Million (Q1 2018 was during the Gigafactory "ramp up", so they needed to pay for all of the equipment as the factory became operational)
> I've always thought that FUD regarding Tesla is mostly caused by short-sightedness and that they're not profitable because every dollar they make is going towards expansion.
They posted an operating loss of $500 Million in Q1 2019.
* Revenues -- The price of the car. If someone pays $40,000 for a car, that is +$40,000 in Revenue.
* Cost of Revenue -- The price Tesla paid to make a car. Based on Q1 numbers, Tesla paid $32,561 to make a $40,000 sale.
* Operating Expenses -- The cost of service centers, sales staff, administration, research and development, etc. etc. These don't "scale" with the car like "cost of revenue" does. Tesla spent $1 Billion on OpEx in Q1 2019.
* Operating Profit/Loss: Revenues - Cost of Revenues - OpEx. Tesla lost $500 Million at this point.
* Net Loss: Don't forget the interest rate on loans: 157 Million for the quarter. Net Loss: $667 Million.
All in all a $667 Million loss.
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* CapEx -- The cost of expanding the business. Building factories, buying new equipment, etc. etc. $279 Million. "Equipment" still has value when you buy it, so this doesn't count as a cost. Theoretically, if the company were to go bankrupt, it would sell the equipment to other companies and make some amount back. So CapEx counts as an 'investment', not as a cost.
* Loans and stuff -- Various loans were paid off this past quarter. $653 Million total.
* Total cash flow out: -$1.593 Billion. (Tesla's cash dropped from $4.2 Billion to $2.6 Billion this past quarter)
How do vehicles in transit at end of quarter affect their Revenue and Cost of Revenue? Are both revenue and cost recognition deferred until Q2, or is just revenue recognition deferred while costs for production are recognized in Q1?
I don't know for sure, but I would expect "Inventory" (on the "Assets" page) to include vehicles in transit, while "Revenue" and "Cost of Revenue" would be both deferred to Q2.
Q4 2018 Inventory was $3.113 Billion. Q1 2018 Inventory was $3.836 Billion.
If the cars were truly paid for already, then the value would still be in the Assets page under "Accounts Receivable": 1.046 Billion in Q1 2019.
Big changes happened this quarter with a sudden shift in demand, to Europe. Such sudden changes always incur a cost, so the losses may well be incidental, and the next quarter should be fine.
Can you please elaborate in this? How does shipping cars create a loss? Other manufacturers do it all the time. Maybe your margins shrink,but what explains the massive loss?
I believe Tesla doesn’t count the cash from a car sale until it is in the customers’ hands.[0] I remember reading that there were a lot of cars mid-shipment to the EU at the end of that quarter.
[0] I believe other auto manufacturers count the cash earlier in the delivery process, like when sold to a dealer, correct?
I know little about the financial world, but I used to listen to their earnings calls for fun. I remember Musk and their previous CFO saying that they didn’t count the cash of a sale until the customer received the car. But again, I could have misunderstood.
I don't think flagging the story with momentum and commenting on the story with no upvotes is the right thing to do, it'll result in two buried threads (a flag is a potent downvote). Just ask them to update the URL of this post instead. Usually mods are pretty quick to do a swap for posts that are on the front page.
lol, let's bury an article by independent financial press and replace it with the company spin, making no mention of poor results vs consensus analyst estimates, and hiding the most important info (-2.90 EPS, $4.5b rev) on Page 6.
Two points. One is that you have to look at the trends over the years, not just quarterly ups and downs, and there Tesla is doing remarkably well.
But by far the more important point is that the EV revolution is finally taking off. Thanks to Tesla's example and plunging battery prices (down %35 in the last year alone), a whole bunch of EV's are going to come on the market in the next few years. And sticker price for the larger ones is predicted to match ICE's around 2023, and keep falling after that.
This is going to turn the auto industry upside down, and be a huge step in saving the environment. So don't focus so much on Tesla, look at the larger trends.
Tesla has NEVER posted a yearly net income in its entire life. Q1 2019 is quite a bad start, with another $700 Million loss to start this year. That's the trend: losing money by any measurement on a yearly basis. Free Cash flow? Negative. Net Income? Negative. Etc. etc.
> This is going to turn the auto industry upside down, and be a huge step in saving the environment. So don't focus so much on Tesla, look at the larger trends.
Tesla lost 1.5 Billion this quarter and is down to $2.2 Billion in cash. A capital raise is absolutely necessary to prevent this company from going bankrupt.
I mean, I wanna stop global warming as much as you do. But an unsustainable business model is doomed to fail. This company needs to start making a profit (and not just a quarterly non-GAAP profit... I mean a real GAAP profit measured on a yearly basis)
> I mean, I wanna stop global warming as much as you do. But an unsustainable business model is doomed to fail. This company needs to start making a profit (and not just a quarterly non-GAAP profit... I mean a real GAAP profit measured on a yearly basis)
So many darlings don't ever post profits though. Palo Alto Networks is a prime example. They've never posted a GAAP profit, ever. Yet... It trades at ~38x and the stock has rocketed over the years. Non-GAAP reporting is a racket and should be illegal.
Fair enough. But there's a big difference between losing 127 million / year like Palo Alto networks, and losing 700 million / QUARTER like Tesla just did.
The amount is only relevant if it's a trend or unfounded. I know it's en vogue to be a Tesla naysayer, however they have posted profits previously. My point was that with Palo Alto Networks they have zero quarters of profit over 25+ quarters. And, while they are the example I chose, they're very much not alone.
This isn't a software company. Tesla is a car company with only ~15% gross margin.
It wasn't ONLY Tesla that lost a bunch of sales last quarter. Across the board, Toyota, Ford, GM, and more have been closing factories and preparing for an incoming slowdown in sales. Car sales are well known to be cyclic: people only buy new cars when they need a car... and we're entering the cycle where most people don't need a new car.
A ~70,000 cars delivered quarter (like Q1 2019) results in a loss of $700,000,000. Tesla can only do this maybe 4 or 5 more times before they completely run out of cash (depending on how many capital raises / additional debt they take on. They currently only have $2.2 Billion, so their cash-burn currently extrapolates to a little over ~3 quarters !!).
And general economic conditions make it look like things are getting worse, not better, for Tesla and the general car industry.
> My point was that with Palo Alto Networks they have zero quarters of profit over 25+ quarters.
When you're spending $1 Billion/year on sales/marketing, and losing $100 Million/year, you have a sustainable business.
Palo Alto Networks is profitable as long as they drop their marketing expenses just slightly (~10% less marketing). I'm willing to give Palo Alto Executives the benefit of the doubt: that their marketing costs are worth the debt. Its also not a very big loss: Palo Alto Networks can sustain this net-loss for another 10+ years (Cash on Hand is ~1 Billion, and they are losing only ~100 million/year)
Tesla on the other hand has... like 7 quarters... at the current burn rate. And unlike Palo Alto Networks, there's no easy solution in their financial sheets: Tesla's financial statements look relatively lean, no fat in there and yet they are unable to consistently make a profit.
> When you're spending $1 Billion/year on sales/marketing, and losing $100 Million/year, you have a sustainable business.
If I read this correctly you're defending spending $1Bn in marketing to generate $100M loss when you're business is at run rate? Cash on hand doesn't matter. If it truly takes that level investment in marketing to get to that level of profit you're just delaying the inevitable.
As an aside Palo Alto Networks is not a software company. >50% of their revenue comes from hardware firewall sales (a dying market). If you do the long term math on them the business looks much weaker than you posit because margins are much tighter on the software portions of the products. You can't sell a virtual firewall for 6-figures on hardware you build for less than $15k.
The reason Tesla doesn't post yearly profits is it is still in start-up mode, so it doesn't sit back and maximize profits from what it has developed so far, but charges ahead into new areas. Look at all it has going on now: it is working on the semi, model y, and a pick-up truck, doing a renewal of the S and the X, working like crazy on self-driving, developing solar tiles, and building a gigafactory in China.
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[ 2.4 ms ] story [ 109 ms ] threadhttps://twitter.com/TeslaCharts/status/1121167252559151104
There’s a lot of schadenfreude on Twitter but the stock price has barely budged in after hours trading.
https://mobile.twitter.com/TeslaHistorian
I've always thought that FUD regarding Tesla is mostly caused by short-sightedness and that they're not profitable because every dollar they make is going towards expansion.
Is this accurate?
Very little of their cash actually goes to expansion of manufacturing.
And is there an inactive manufacturing line gathering dust? I was under the impression it is the same line in use right now, they just cut back on automation. The rest you mention seems like pocket money compared to the company's operating expenses.
Tesla depreciated about $467 million in the current quarter.
Ramping up manufacturing is hard on CF, but not intrinsically hard on P&L.
That's called Capital Expenditure. Page 9: https://ir.tesla.com/static-files/b2218d34-fbee-4f1f-ac95-05...
Q1 2019 had a CapEx of $279 Million. In contrast, Q1 2018 was a CapEx of $655 Million (Q1 2018 was during the Gigafactory "ramp up", so they needed to pay for all of the equipment as the factory became operational)
> I've always thought that FUD regarding Tesla is mostly caused by short-sightedness and that they're not profitable because every dollar they make is going towards expansion.
They posted an operating loss of $500 Million in Q1 2019.
* Revenues -- The price of the car. If someone pays $40,000 for a car, that is +$40,000 in Revenue.
* Cost of Revenue -- The price Tesla paid to make a car. Based on Q1 numbers, Tesla paid $32,561 to make a $40,000 sale.
* Operating Expenses -- The cost of service centers, sales staff, administration, research and development, etc. etc. These don't "scale" with the car like "cost of revenue" does. Tesla spent $1 Billion on OpEx in Q1 2019.
* Operating Profit/Loss: Revenues - Cost of Revenues - OpEx. Tesla lost $500 Million at this point.
* Net Loss: Don't forget the interest rate on loans: 157 Million for the quarter. Net Loss: $667 Million.
All in all a $667 Million loss.
---------
* CapEx -- The cost of expanding the business. Building factories, buying new equipment, etc. etc. $279 Million. "Equipment" still has value when you buy it, so this doesn't count as a cost. Theoretically, if the company were to go bankrupt, it would sell the equipment to other companies and make some amount back. So CapEx counts as an 'investment', not as a cost.
* Loans and stuff -- Various loans were paid off this past quarter. $653 Million total.
* Total cash flow out: -$1.593 Billion. (Tesla's cash dropped from $4.2 Billion to $2.6 Billion this past quarter)
All in all, you can figure it all out on page 7, 8, 9, and 10 of the paper: https://ir.tesla.com/static-files/b2218d34-fbee-4f1f-ac95-05...
Q4 2018 Inventory was $3.113 Billion. Q1 2018 Inventory was $3.836 Billion.
If the cars were truly paid for already, then the value would still be in the Assets page under "Accounts Receivable": 1.046 Billion in Q1 2019.
[0] I believe other auto manufacturers count the cash earlier in the delivery process, like when sold to a dealer, correct?
If so, then it has already been counted.
So what is in their accounts receivable?
I've flagged this story, mostly because there's another Hacker News post with a "more direct link" to the story: https://news.ycombinator.com/item?id=19743051
I would argue that the direct information from Tesla's website is the primary document. Maybe merge the topics together? Thanks.
At this point, it seems clear that "this" topic has more momentum. But both the topics were at only ~3 votes when I made my post.
But by far the more important point is that the EV revolution is finally taking off. Thanks to Tesla's example and plunging battery prices (down %35 in the last year alone), a whole bunch of EV's are going to come on the market in the next few years. And sticker price for the larger ones is predicted to match ICE's around 2023, and keep falling after that.
This is going to turn the auto industry upside down, and be a huge step in saving the environment. So don't focus so much on Tesla, look at the larger trends.
https://fairlyvalued.com/company/TSLA
Tesla has NEVER posted a yearly net income in its entire life. Q1 2019 is quite a bad start, with another $700 Million loss to start this year. That's the trend: losing money by any measurement on a yearly basis. Free Cash flow? Negative. Net Income? Negative. Etc. etc.
> This is going to turn the auto industry upside down, and be a huge step in saving the environment. So don't focus so much on Tesla, look at the larger trends.
Tesla lost 1.5 Billion this quarter and is down to $2.2 Billion in cash. A capital raise is absolutely necessary to prevent this company from going bankrupt.
I mean, I wanna stop global warming as much as you do. But an unsustainable business model is doomed to fail. This company needs to start making a profit (and not just a quarterly non-GAAP profit... I mean a real GAAP profit measured on a yearly basis)
So many darlings don't ever post profits though. Palo Alto Networks is a prime example. They've never posted a GAAP profit, ever. Yet... It trades at ~38x and the stock has rocketed over the years. Non-GAAP reporting is a racket and should be illegal.
Yes, 700 million gone in one quarter.
It wasn't ONLY Tesla that lost a bunch of sales last quarter. Across the board, Toyota, Ford, GM, and more have been closing factories and preparing for an incoming slowdown in sales. Car sales are well known to be cyclic: people only buy new cars when they need a car... and we're entering the cycle where most people don't need a new car.
A ~70,000 cars delivered quarter (like Q1 2019) results in a loss of $700,000,000. Tesla can only do this maybe 4 or 5 more times before they completely run out of cash (depending on how many capital raises / additional debt they take on. They currently only have $2.2 Billion, so their cash-burn currently extrapolates to a little over ~3 quarters !!).
And general economic conditions make it look like things are getting worse, not better, for Tesla and the general car industry.
> My point was that with Palo Alto Networks they have zero quarters of profit over 25+ quarters.
When you're spending $1 Billion/year on sales/marketing, and losing $100 Million/year, you have a sustainable business.
Palo Alto Networks is profitable as long as they drop their marketing expenses just slightly (~10% less marketing). I'm willing to give Palo Alto Executives the benefit of the doubt: that their marketing costs are worth the debt. Its also not a very big loss: Palo Alto Networks can sustain this net-loss for another 10+ years (Cash on Hand is ~1 Billion, and they are losing only ~100 million/year)
Tesla on the other hand has... like 7 quarters... at the current burn rate. And unlike Palo Alto Networks, there's no easy solution in their financial sheets: Tesla's financial statements look relatively lean, no fat in there and yet they are unable to consistently make a profit.
If I read this correctly you're defending spending $1Bn in marketing to generate $100M loss when you're business is at run rate? Cash on hand doesn't matter. If it truly takes that level investment in marketing to get to that level of profit you're just delaying the inevitable.
As an aside Palo Alto Networks is not a software company. >50% of their revenue comes from hardware firewall sales (a dying market). If you do the long term math on them the business looks much weaker than you posit because margins are much tighter on the software portions of the products. You can't sell a virtual firewall for 6-figures on hardware you build for less than $15k.