Tesla seems to have a liquidity problem.At the end of May, Elon Musk sent a round-trip email to all employees urging them to take harsh austerity measures. The cash, he said, would only last for ten months. The actual state of Tesla’s finances has always been the subject of controversy between Tesla fans and Tesla haters. Tesla fans keep claiming that Tesla earns money with every car produced. But “operational” is only half the truth: Opel has produced and sold more than one million cars every year in recent years – at prices well above the cost of production. Nevertheless, Opel has caused billions of dollars in losses. This is also the reason why GM sold Opel to PSA for comparatively ridiculous money: 1.3 billion euros, which corresponds to the purchase price of around 70,000 Opel Astra. By comparison, more than 100,000 Astras were produced at Opel’s Factory in Gleiwitz in Poland alone in the first half of 2016.
Tesla has the problem that all start-ups have: They raise a lot of money in a short time after convincing investors with their business model.With this money, they finance the expansion of their company. Especially with a new company, it is virtually impossible for it to make a profit from the stand. That is why the inverter money is “burned”. The art for start-ups is to raise new investor money for so long that the capital is sufficient to make the company profitable. It is not enough for the company to be operationally profitable from one point X or more, i.e. to take more money per month than it spends. No, the company also needs to re-enter the money it burned before. I estimate that Tesla has made about ‘7 billion in losses in recent years. In order to make up for these losses alone, they would have to sell 140,000 cars of 50,000 US dollars – without having to pay a penny. Let’s assume that Tesla – as its fans keep claiming – has a 20 percent gross margin on every car, then they would have to sell 700,000 cars to pay off the seven billion debts. Tesla delivered 63,000 cars in the last quarter. If Tesla were operationally profitable today, they would need another 11 quarters to reinvest, which is almost three years. The problem is that Tesla is not profitable, they are still burning more capital than they take. Thus, the point at which investors can expect a return on investment is shifting further and further back. And time plays against Tesla rather than for them: competitors shoot out of the ground like mushrooms. In addition, the global economy is generally gloomy. More and more investors are likely to be looking for investments that bring reliable profit. Anyone who buys a Tesla share today knows that they will not see a dividend for the next five years, even if everything goes reasonably well on schedule at Tesla.
Many investors don’t like that: the share price has halved in the last year.This reduces the company’s valuation – and thus the opportunities to obtain fresh capital. On the other hand, a lower company valuation could cause a major investor to step in – Toyota, perhaps?