Tesla posts a Q4 loss but the company’s revenue grows amid acquisitions
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It's interesting to compare the recent Uber articles against the Tesla articles. There's a lot of good to say about Tesla, Uber... not so much.
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Does that mean they intend to begin manufacturing this summer? Presumably investment in the development of the Model 3 is well underway already...
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- he anticipated “the storage market could grow at maybe twice the rate of the automotive business
Why the stock price has shot up. Wall Street catching on to storage.
Musk has the most capacity and the lowest battery cost.
Why the stock price has shot up. Wall Street catching on to storage.
Musk has the most capacity and the lowest battery cost.
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I want Model 3! Two actually. Black for me and a blue one for my SO. (Her mom is convinced there's a blue car curse in their family because they have totaled every blue car they've ever owned. But that's her favorite color.)
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Long game used to be the default operating procedure for a large business. Now long game corporations are weird and they are made fun of when they post quarterly losses. Sigh.
That's what we get when investors become speculators, and they use computers to buy and sell stock in 1 ms intervals.
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I have to assume to some degree used Tesla car batteries can be used in storage areas. A cell at 70% of initial capacity may not be great in a car but fine for storage, especially if there is some sort of redundancy so that a suddenly failed cell doesn't ruin the backup power.
As a reminder, when you look at range, remember to multiply by 0.7.
As a reminder, when you look at range, remember to multiply by 0.7.
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What I really love about Musk (despite his flaws) is stuff like Tesla freely reporting losses in an era when it seems like cooking the books is SOP at most companies.
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As much as I like Tesla, I don't think praise is necessary for not cooking the books. I think that should be expected. And who's to say that they didn't?
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IIRC there are things that are "acceptable" to report as earnings that Tesla doesn't in order to give a more realistic picture of what is going on.
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Seems to me that their non-GAAP measures have looked better than their GAAP measures at lease for the last 3 Qs
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Of course not. Posting gigaprofits would be stupid. They have vastly more demand than they can supply and are plowing the cash back into expanding production, service, superchargers, etc.
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I still don't believe it'll happen but the idea of maybe getting my car this year brings me a little grin.
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Why? The guys running Tesloop using just about the most abusive cycle possible* on a Model S are over 200k miles with >90% of original capacity.
*near-continuous runs from 100% down to just above 0%, then Supercharging. All day, every day.
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Yes, in large part because of the insane way GAAP deals with the buy-back guarantee. Basically, assume that you have liability for the guaranteed amount and the cars you would get back will be worth $0.
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Why do people keep repeating this debunked crap?
They don't lose money on every car. Their gross margins are among the highest in the industry.
Shockingly, they keep reinvesting money in the company to grow at >50% per year rather than post a regular profit.
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I'm curious when they will reach the tipping point of no longer having last amounts of money deposited from future projects. The demand curve for these cars eventually is going to not work in their favor. Does Tesla eventually have cars sitting in a lot waiting for delivery?
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Cash up $300M to $3.4B.
Gross Profit Margin around 20%
You don't have to be a fan, but you need to remember how capital-heavy ventures like manufacturing take time to recover CapEx. Also remember that there are about 600K reservations for a car, Model 3, with a projected Average Selling Price (ASP) of $42K. That's a lot of revenue too, about $25B.
Check out the graph here:
The first part of the graph has already happened. We'll see what the second part looks like for real in a few years.
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While I agree that the GIgafactories are going to be their most profitable endeavor, I would hope that they also think about investing in another assembly line for their Model 3 because I have a feeling they will be hard-pressed to keep up with demand.
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Oh, you mean like last quarter when Tesla chose to book a whole year's worth of emissions credits in one quarter in order to create the illusion of profitability at a time when investors were worried about them taking on another bankrupt company, Solar City? Yes, Tesla is totally immune to playing accounting games when they need to, it just so happens that getting a year's worth of credits every three months is a "realistic picture of what is going on".
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It seems likely that at some point they'll open a gigafactory and assembly plant in Europe but they'll want to have things dialed in at the existing plants first. It's a LOT easier to do a second plant once you've got the hard earned knowledge from the first (my dad's in chemical sales and the number of customers who won't switch once they've got a process locked in and are ready to open another plant is really, really high)
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More important than gigarevenue or gigaprofits? Multi-deca-percent growth. Let's to do some loose math.
Tesla lost 5% this quarter, but grew a bit over 80%. They did it with 20% gross margins, meaning that (roughly speaking) if they'd just made vehicles and walked home, no investments in the future, they would have made 20% profits and had no growth. Instead, they invested ~25% of their revenue into growth, and got 80% growth out of it.
What happens to a hypothetical company that could choose 20% profits or 5% losses with 80+ percent grains? Let's give it five years of growth potential, then say it saturates the market, and has five years of no growth.
Under the no-growth scenario, our company would accumulate profits of 20% of today's revenues for ten years, or 2x today's revenues.
In the growth scenario, after five years they'd have revenues nearly 20 times as big as today's. but they'd have accumulated debt of about 20% of their revenue at that date, or 4x today's revenue. But they make 20% a year on 20x the revenue! So it would take a year to pay off debts, followed by five years of 4x today's revenue in profits each year, or 16x today's revenue in accumulated profits at the end of the decade.
The details of this scenario are unrealistic, of course, but the general lesson is not. If you can lose a little money while nearly doubling in size each year, the potential payout is huge. People complain that Tesla keeps losing money, year after year, but they're doing it while growing at a spectacular rate, year after year. They'll keep making this choice so long as spending the money will get them spectacular growth rates, as the payout just gets bigger and bigger.
Edit: pkirvan has pointed out that my assumptions here aren't right, in that large capex don't get put on the balance sheet all at once and so aren't responsible for the current losses. Thanks to the Ars community for always having more knowledgeable people than myself.
Though I don't know enough about accounting to make the case for or against Tesla in these regards, I think the basic concept I was trying to illustrate - that at some point a high growth rate outweighs small losses, because exponential revenue growth can lead to a budget that dwarfs early losses - holds.
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Cash up $300M to $3.4B.
Gross Profit Margin around 20%
You don't have to be a fan, but you need to remember how capital-heavy ventures like manufacturing take time to recover CapEx. Also remember that there are about 600K reservations for a car, Model 3, with a projected Average Selling Price (ASP) of $42K. That's a lot of revenue too, about $25B.
Check out the graph here:
The first part of the graph has already happened. We'll see what the second part looks like for real in a few years.
Not sure where that graph is from. Total 2016 deliveries according to tesla were 76k, so yeah the first part of the graph has happened, and the second part is already falling significantly behind.
Also the 2017 numbers are odd. Why does it assume so many model X's relative to S's? X is always going to be a more expensive and more niche car.
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Actually no, those gross profits ended up being spent on selling, general and administrative expenses. Their investments into growth and capital expenditures came from loans and equity sales.
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Not really. There's a lot of misconceptions out there about 'investments' counting against Tesla's profits. They don't. Spending on such things as R&D, factories, etc. for new products is booked bit by bit as those new products are sold. The only effect it has on a company balance sheet before the products it is used for are sold is a reduction in cash with corresponding increase in assets- that is to say investment for the future has no net effect on profit/loss. Incidentally, cash grew anyways which, as Tesla openly explains in the PDF, is due to drawing some cash on their line of credit and absorbing Solar City's cash, not due to cashflow from their actual operations.
Now some types of investment for the future do cause losses. For example, Tesla currently sells cars at a loss to build their revenue and market share. That can be considered an investment. But wait, you say, doesn't Tesla make 20% profit on their cars? Of course not. That figure doesn't include selling, general and administrative expenses which are necessary parts of being a car manufacturer. That's like Air Canada saying we made 20% profit on our flights without factoring in that they have to pay the baggage handlers. Another investment for the future that affects today's profits is advertising, and yet another would be covering Solar City's loses.
So to sum it up, yes their profits are slightly affected by being future oriented, but not to the degree most people think. It's not like gigafactory construction or Model 3 tooling is causing today's loss.
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Sure but they are doing massive hiring (2130 openings on tesla.com at the moment), mostly in service/retail, in anticipation of the Model 3 launch and payroll most certainly contributes to their losses, it's money going out of the company.
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Thanks for clarifying, I'm glad I'll no longer be spreading misconceptions!
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Pretty sure that money isn't counted in the numbers presented here.. not until they actually ship the model 3's
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I pointed this out in a previous comment and got downvoted by a few dozen people that couldn't even bother to offer a counter-point, but I'll say it again: Tesla's future is by no means certain.
They burned through nearly a billion dollars in the last quarter. They still have over $3 billion in total debt and don't make any money. Auto revenue and total deliveries were down compared to last year. And that ignores the fun that is SolarCity (another company that had loads of debt and didn't make money).
Tesla's expansion has been through loans and secondary stock offerings (it sounds like another might be coming soon too) - this is not sustainable and they will stop doing it not by choice, but when a creditor stops giving them more money. The only reason they got more loans was because of the hope that they can make money some time in the future to pay it back. If they were to just stop expanding right now, their lenders would flip out as the story of massive future profits disappears. It's a tricky tight rope to walk...
They have bet the company on the Model 3. Sure, they have a ton of pre-orders, but those can't be spent and are fully refundable. This isn't like building software but for some reason the Silicon Valley types like to apply those same rules. You can't just "pivot" to a new business or just "stop" building your half-built factory when you have billions in debt and don't make money. They have to keep going full-bore and they need the Model 3 to be a runaway success from the start.
Musk originally hoped for 500k delivers for 2018 - that clearly isn't going to happen. Even hitting that number by 2020 is no small feat and I would be thoroughly impressed if they can reach it! Furthermore, I'm not sure I would want a car from a company ramping up production 10x in such a short time, but then again, I'm not one to commit money to buying a $30k+ car sight unseen, that wont be delivered for another 2-3 years. To each their own.
In short, nobody is going to care if Tesla had the potential to make gobs of money 20 years from now if they can't make their debt payments 2-3 years from now. If the Model 3 isn't an instant success, Tesla will be in serious trouble.
With that said, I think Tesla has a done a lot to really kick other car manufacturers in the ass when it comes to EVs. I've longed for an electric version of an A4 or a 3-series BMW that actually looks the same as the ICE models! Rumor is that exactly that is coming in the 3-4 years or so....
They burned through nearly a billion dollars in the last quarter. They still have over $3 billion in total debt and don't make any money. Auto revenue and total deliveries were down compared to last year. And that ignores the fun that is SolarCity (another company that had loads of debt and didn't make money).
Tesla's expansion has been through loans and secondary stock offerings (it sounds like another might be coming soon too) - this is not sustainable and they will stop doing it not by choice, but when a creditor stops giving them more money. The only reason they got more loans was because of the hope that they can make money some time in the future to pay it back. If they were to just stop expanding right now, their lenders would flip out as the story of massive future profits disappears. It's a tricky tight rope to walk...
They have bet the company on the Model 3. Sure, they have a ton of pre-orders, but those can't be spent and are fully refundable. This isn't like building software but for some reason the Silicon Valley types like to apply those same rules. You can't just "pivot" to a new business or just "stop" building your half-built factory when you have billions in debt and don't make money. They have to keep going full-bore and they need the Model 3 to be a runaway success from the start.
Musk originally hoped for 500k delivers for 2018 - that clearly isn't going to happen. Even hitting that number by 2020 is no small feat and I would be thoroughly impressed if they can reach it! Furthermore, I'm not sure I would want a car from a company ramping up production 10x in such a short time, but then again, I'm not one to commit money to buying a $30k+ car sight unseen, that wont be delivered for another 2-3 years. To each their own.
In short, nobody is going to care if Tesla had the potential to make gobs of money 20 years from now if they can't make their debt payments 2-3 years from now. If the Model 3 isn't an instant success, Tesla will be in serious trouble.
With that said, I think Tesla has a done a lot to really kick other car manufacturers in the ass when it comes to EVs. I've longed for an electric version of an A4 or a 3-series BMW that actually looks the same as the ICE models! Rumor is that exactly that is coming in the 3-4 years or so....
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I'm torn. On the one hand, you have a thoughtful post and make good points. On the other hand, you open by whining about your ratings. That just isn't how adults are supposed to behave- there are more important things in life than how popular you are. For wasting time complaining about the voting system I will have to give you a down vote. Sorry.
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I can't wait till every car is integrated with an auto-pilot. Pretty much all the crashes of Tesla cars were caused by humans being morons or not obeying the Law. When all cars have them, there will be no human error.
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They are upgrading the factory in Fremont (IIRC, it will be twice as big than it is now), and they also plan to assemble the Model 3 drivetrains in the Nevada Gigafactory, not just the batteries.
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What on Earth are you talking about? Deliveries in 2016 are up 64% when compared to 2015.
Nobody is expecting you to. I am very interested in getting a Model 3. But I will wait until it's actually available and I have done proper comparisons and test-drives.
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