Tesla Motors, Electric Vehicles, and Battery Hoopla
Please don’t tell me that after all this, all our rooting for the home team, that Elon Musk of Tesla Motors fame (pictured) turns out to be just another battery salesman.
I remember several asinine conversations I had with representatives of Coda Motors (defunct EV manufacturer) at various car shows, in which I asked (only somewhat more politely than this):
You just raised another round of financing from investors, $76 million this time, to begin manufacturing and selling this car that most people say is hideously unattractive, performs unimpressively, is far more expensive than its main competitor (the Nissan LEAF) and is sold by a company that is extremely unlikely to last even a few months, not to mention long enough to make good on warranty claims. I want to sign up for salesmanship lessons from the guy who pitched this to your investor community. Can you tell me exactly how you folks accomplished this?
The answer? The battery. Representatives were unable to say anything at all about my question, other than the company is actually a battery manufacturer (with a secret “superior technology,” of course) in disguise. Of course, that didn’t make any sense either, and Coda closed its doors in 2013.
My point is that I’ll be deeply saddened if Tesla can’t sell its (fabulous) cars profitably, and winds up with some cock and bull story about batteries.
Tesla’s debt has climbed to ~$1.435 billion dollars. That’s WITH the large assortment of government subsidies that are funneled into bribing people to buy these vehicles.
2015 is almost certain to end in the black, as they will attempt to roll out an entirely new vehicle.
The company may start seeing a modest net profit by 2016 – assuming the taxpayers are still forced to pay for someone else’s choice to buy a more polluting car – but by then their total debt will exceed $1.5 billion. It will be YEARS before there is any story here other than unfounded hope and unlimited corruption.
They might make it… and with the “gigafactory” they might actually benefit the world… But anyone investing at today’s inflated value is not going to see a reasonable return on that investment. That’s just not going to happen anytime soon.
Oh, I wouldn’t be too quick to arrive at that conclusion (re: their stock price). Speculation and momentum are hard to predict, and the stock is almost 30% off its all-time high.
Craig,
Stock prices might be 30% off their all time high, but they’re still ~30X revenue, which is insane for a company that is still losing money every quarter entering its 6th year.
It’s even more insane when they are increasing their debt at a rate of over $300 million/year, or >10% of their total yearly revenue.
Their annual net loss has been accelerating YOY as their sales have increased, so the problem isn’t one of administrative burden that could easily be offset by better sales volume. The administrative and sales burden have increased in proportion to their sales, so they are perpetually selling at a loss, with the losses increasing in proportion to sales.
The company is a mechanism for turning shareholder equity into debt, all while selling a cool but environmentally destructive vehicle. I’ll be happy to acknowledge that there is solid potential that the company may do well in a few years… but that promise of possible future return is why the company shouldn’t be devalued into bankruptcy… It is not a reason why people should be dumping ~30X revenue on a turd of a company that is running deeper and deeper into the red every quarter.
Oops, I was looking at quarterly revenue… I guess Tesla’s only traded at ~8X annual revenue. Still, a company that never sees black ink shouldn’t get 8X revenue.