Sales at Tesla doubled year on year in the latest quarter. But still the company is making a loss, and it finds itself in a kind or race, can it start making money before investors lose patience?
Tesla delivered 24,500 cars in its latest quarter. Production stood at 25,185 vehicles, 37% up on the previous quarter and the company said that production in Q4 would roughly be the same.
Elon Musk, the company’s high-profile CEO predicts that Q3 and Q4 combined will see the company make 50,000 cars, compared to around 30,000 in the first half of the year.
So that is pretty rapid growth, but here is the rub. For every car the company makes it sees a loss. It is haemorrhaging cash at a rate of knots that is truly startling.
At the end of Q2, its cash stood at $3.25 billion, but after taking into account commitments, debt financing, and its investment plans, cash holdings are much lower, possibly as low as $400 million, suggests this report.
The company says it will be making 500,000 cars a year by 2018.
But if it is making a loss on every car, that may not help very much, 500,000 cars a year will just mean even bigger losses.
The hope, and frankly it is not an unreasonable hope, is that as manufacturing ramps up, as its investment bears fruit, as its giant Gigafactory starts making batteries for ever less money, the company will exploit economies of scale, and that loss per car will turn into a healthy profit.
Then again, with a market cap of $30 billion, it has to start making an awful lot of money per car to justify the valuation. To put that market cap in context, General Motors is valued at around $50 billion and Fiat Chrysler just $8 billion.
Elon Musk bets big. Take SpaceX, and Musk’s idea to colonise Mars, it’s a different company, but same boss, also with big, big ideas.
For as long as Wall Street sees him as a kind rock star of technology, for as long as he continues to dazzle the world with his extraordinary vision, and Bold (with a capital B) ideas, investors will no doubt continue to plough their money in.
But one day he will have to deliver, and no small number of investors want him to deliver before he makes many more BIG statements about changing the world – or indeed, changing the Solar System.