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Tesla May Need Cash To Deliver On the Model 3, Says Analysts (cnbc.com) 162

An anonymous reader writes: After receiving more than 198,000 Model 3 preorders in the first 24 hours, Tesla may need more cash if it hopes to deliver their new electric vehicle to customers on time, analysts said. Elon Musk plans to launch the Model 3 in late 2017, eventually boosting the company's annual production tenfold to 500,000 by 2020. Many analysts believe some customers making early reservations may not receive their vehicle until 2019 or 2020. Morgan Stanley analyst Adam Jonas, predicted Tesla's sales will hit under 250,000 in 2020. Barclays analyst Brian Johnson, believes the surge of Model 3 reservations could reach 300,000 by the end of June. Some analysts expect the first cars will sell for an average of $50,000-$60,000, but Tesla prices its current models in several "tiers," depending on content and optional features. RBC analyst Joseph Spak said strong initial orders for the Model 3 could help Tesla achieve positive free cash flow. In February, the company said it expected to be cash-flow positive in March. Spak said Tesla may not be able to fulfill many of the early orders before 2019: "Demand was never really our concern, it is more about execution and getting production up to meet demand."
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Tesla May Need Cash To Deliver On the Model 3, Says Analysts

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  • Err - no. (Score:5, Insightful)

    by queazocotal ( 915608 ) on Sunday April 03, 2016 @01:55PM (#51833485)

    There are many commercial entities that would be overjoyed to finance Tesla some billions based on the outstanding pre-order book.

    • Re:Err - no. (Score:4, Insightful)

      by N1AK ( 864906 ) on Sunday April 03, 2016 @02:08PM (#51833565) Homepage
      Demand alone doesn't mean things are great for Tesla, though I'm certainly not claiming there is an issue. If there's huge demand now for something that can't viably be provided at the expected price point in an acceptable time period that's an issue regardless of immediate cash flow issues. I really want Tesla to succeed and it's great that a lot of other people clearly do as well, but that alone doesn't make it a certainty.
      • by Kjella ( 173770 )

        Demand alone doesn't mean things are great for Tesla, though I'm certainly not claiming there is an issue. If there's huge demand now for something that can't viably be provided at the expected price point in an acceptable time period that's an issue regardless of immediate cash flow issues. I really want Tesla to succeed and it's great that a lot of other people clearly do as well, but that alone doesn't make it a certainty.

        An issue for who? Sure, unfulfilled demand could let some other company scoop up the market but unless they got a hidden Gigafactory they'll probably be resource limited too. Right now Elon Musk is either going "awesome, just what I needed to secure funding and expand quickly" or "dang, I should have asked for $40k" but I don't see a single downside. Also despite getting in line they haven't really promised how they'll give priority, we know there'll be regional releases and that current Tesla owners get pr

        • by N1AK ( 864906 )
          Tesla. If they have in fact promised to produce a product which they can't provide at a price and time period that matches their customers expectations. To give an extreme example to demonstrate: If I offered to sell people a car that could match a BMW 330i for performance while running on water for just $20k the fact that 10 million people want to buy it doesn't stop it being an issue if I have no viable way of providing it and wreck my brand by massively failing to deliver.

          Obviously I'm not saying that
      • Boloney.
        Tesla stated before taking pre orders delivery is scheduled for late 2017. That's about 20 months away. I don't see how you can say Tesla can't begin to deliver in 20 months, as it already has a handful of prototypes right now (they gave test drives, you know it, doesn't you ?)
        A for Tesla doesn't have enough money, that's another BS argument. Tesla is loosing money overall because its funding for Model 3 R&D with revenues from MS/MX deliveries. For the last reported quarter (Q4 2

    • by AmiMoJo ( 196126 )

      UK buyers are looking at 2020 for delivery now. First cars are expected for 2019, but there are so many pre-orders production for the first year is all sold.

      US buyers are probably looking at late 2018 now too.

      Looks good fit investors, years of production already sold.

    • by Okian Warrior ( 537106 ) on Sunday April 03, 2016 @02:31PM (#51833675) Homepage Journal

      There are many commercial entities that would be overjoyed to finance Tesla some billions based on the outstanding pre-order book.

      And even more commercial entities that would be overjoyed if Tesla crashed and burned.

      Analysts are falling over themselves trying to paint Tesla in a bad light. Usually this is done by "black-box analytics" without taking the context into account. We're seeing this in the original article: massive public demand is bad for Tesla because it will hurt them in the long run.

      For example, Tesla has had little or no profit for the last couple of quarters because they're putting everything into the gigafactory [wikipedia.org]. Looked at as a black box, Tesla is a company with little or no revenue.

      ...but this doesn't account for the gigafactory, or that Tesla will pretty-much corner the market in cars *and* lithium batteries in a couple of years.

      The price point of Tesla is all over the map, analysts put it anywhere from $100 to $1900 [investorplace.com] .

      It's insane. There's a subtext among certain analysts and pundits that they are *only* dissing Tesla because they want to bolster their GM stock. Then there's the analysts and pundits who put sterile figures into an algorithm and come up with a "buy", "sell", or "hold" outcome and then justify that outcome (any outcome, it doesn't matter) from whatever is going on at the time.

      There's literally(*) no source of reliable information about stocks that a common person can access.

      So far as I can tell, the best you can hope for is to have an engineer's understanding of the context and make an educated guess. Company is working on an implantable insulin delivery device? If you think the concept is feasible, it's probably a good bet. Can a company makes a razor that cuts hair with a laser [bgr.com]? Probably not a good bet.

      Reading analysts predictions about stocks is worthless. You can get just as good information by plotting a stocks' astrology chart [stockastrologer.com].

      (*) I'm using the term "literal" by it's dictionary definition.

      • by joh ( 27088 ) on Sunday April 03, 2016 @02:40PM (#51833715)

        No company with pre-orders of this magnitude can or should have cash problems. It's a bit like SpaceX: They have cornered the market for launches in the classes they can launch and are booked for years. This is not money that is already earned but it is the next thing close to that. If you have cash-flow problems in such a situation and if you do not look like a scam getting money for modest interest should be the most easy thing in the world.

        But yes, people wanting to buy 200000 cars from them will be bad news for those companies who will NOT sell these 200000 cars then. These will not be additional cars, mostly. Almost all companies in this business apart from Tesla will HATE these numbers.

        • No company with pre-orders of this magnitude can or should have cash problems.

          Other than your religious belief in the Cult of Elon - why would you believe that?

          This is not money that is already earned but it is the next thing close to that.

          No, it's not even close to that - as a deposit isn't a commitment to pay. Lenders know that even if you don't.

          If you have cash-flow problems in such a situation and if you do not look like a scam getting money for modest interest should be the most easy

      • (*) I'm using the term "literal" by it's dictionary definition.

        You keep using that word, I do not think it means what you think it means. [gizmodo.com]

      • by Bender0x7D1 ( 536254 ) on Sunday April 03, 2016 @03:17PM (#51833901)

        ...but this doesn't account for the gigafactory, or that Tesla will pretty-much corner the market in cars *and* lithium batteries in a couple of years.

        However, the market for electric cars is a small percentage of overall vehicle sales. According to Wikipedia, Toyota delivered 9.9 million cars in 2012, VW delivered 9.8 million in 2013 and GM delivered 9.9 million in 2015. So, even if Tesla could deliver all 300k cars in 1 year - and it sounds like they can't - it would represent 3% of what the giant automakers deliver in a single year. Given their timeline for delivery, it is more like 1%.

        Now, don't get me wrong. I think Tesla is a cool company, and I don't think it's doomed because it "only" has a 1% marketshare. However, we need to consider it in context of the entire automotive industry, and it most likely won't end up as the one car company to rule the world.

        • Those are fine numbers, and I really *really* appreciate an argument based on numbers and simple logic.

          It's refreshing not to hear "nuh-uh" or "I think it's the opposite" with no support or rationality.

          Good work!

        • Consider it in the context of what people want. Go electric or resign yourself watching taillights tail lights recede in the distance. From now on, performance means electric [wikipedia.org], end of story. Break the price barrier and the damn will burst. Chances are, you already bought your last internal combustion car.

          • The Porsche you linked to is a hybrid. 608HP of internal combustion power, plus 279 HP of electric. Running only on the electric, its range is 12 miles.

            I think my next Porsche will have an ICE in it.

            • The point is, the fastest production cars are now electric. The 918's motor is basically just there to charge the batteries, plus it provides a modest share of extra power, but the main acceleration is electric.

              • Actually, the 918's gas motor provides 75% of the power, however the point still stands: everything fast from now on will have an electric motor in it. As batteries improve, hybrids will rapidly be displaced by full electrics. The next iteration of the 918 will no doubt have bigger electrics and smaller internal combustion, saving weight.

              • "The 918's motor is basically just there to charge the batteries, plus it provides a modest share of extra power, but the main acceleration is electric."

                Why on earth would you need a 600 horsepower engine to charge a battery? The electric portion is a cheap way to boost the HP to over 800 without designing a new engine. Until they can make a 1000+ HP electric motor that still has range, ICE engines will still be faster.

                "The point is, the fastest production cars are now electric. "

                Uh, no. With a top speed of
                • Why on earth would you need a 600 horsepower engine to charge a battery? The electric portion is a cheap way to boost the HP to over 800 without designing a new engine.

                  No. A car that costs the better part of a million dollars can have any engine it wants. The car has electric motors because they have a better power/weight ratio than gas engines, an advantage maximized by a relatively small battery. It has just enough electrics to take the top spot in the 0-60 list and the rest is gas for the energy density. Each time battery energy density goes up, the electric/gas ratio will go up until the gas motor disappears completely, with a huge weight saving in motor, transmission

          • Consider it in the context of what people want. Go electric or resign yourself watching taillights tail lights recede in the distance.

            The number of people who care what the 0-60 time is on their car is a very, very small percentage of the total number of car buyers.

            Most, as in the VAST majority, don't know what their current car is, don't care, and it isn't a factor.

            It just needs to be "good enough".

            Performance will only sell so many cars.

            • Everybody would prefer a fast car if they could afford it.

              • Everybody would prefer a fast car if they could afford it.

                That is either a troll comment, or a comment from someone who doesn't see anything beyond themselves.

                My mother is 71 years old, she still drives, and couldn't care less what the 0-60 time is or how fast her car is. She really does drive like a little old lady.

                My wife isn't quite that bad, but she doesn't care either. She wants something that is easy for the kids to get in and out of, something that is safe and reliable, and something that carries lots of stuff.

                Performance is about number 47 on her care li

        • However, we need to consider it in context of the entire automotive industry, and it most likely won't end up as the one car company to rule the world.

          This idea that it's the goal of companies to rule the world (in their their field) is nonsense. It comes from Microsoft doing that in the 90s. But despite that occurrence it's very rare indeed. And it's not what companies generally shoot for. Success doesn't require extermination of all competitors.

          So, 1%. That coincidentally was the share of the market Steve Jobs said he was shooting for with the iPhone. Get in a few short years they were in the 30% to 60% area of market share, where they've remained ever

        • Now, don't get me wrong. I think Tesla is a cool company, and I don't think it's doomed because it "only" has a 1% marketshare. However, we need to consider it in context of the entire automotive industry, and it most likely won't end up as the one car company to rule the world.

          I agree with you. What I predict will happen is that Tesla is the company we will all remember as causing the tipping point in the switch from ICE to BEV. Who knows whether they will even survive? But what they did was take a market that nobody else wanted to be in, except maybe as a dodge around CAFE fleet standards, and turn it into a market where people desire to buy these kinds of vehicles... to the point that the other manufacturers finally started treating it as a real market to be exploited.

          Even Niss

      • There's literally(*) no source of reliable information about stocks that a common person can access.

        There's literally no source of reliable information about stocks.

    • That pre-order book certainly is impressive, but that's balanced by their existing debt, their lack of positive cashflow, and the multiplier the pre-orders represent over their known (proven) production capacity.

      There's no doubt entities willing to finance them, but I doubt they'd be 'overjoyed'.

      • Companies aren't expected to be profitable in their rapid growth stage. Money is expected to be spent on growth. Amazon wasn't profitable for most of it's existence. That doesn't mean it's a bad company. Nor does it mean that it wasn't very easy to raise finance.

        Tesla keeps on investing in manufacturing capacity, as they keep growing 10 fold, and as they start manufacturing their own batteries.

        • 0.o

          Had I said they were expected to be profitable, you'd have a point. I didn't.

          Nor did I say they wouldn't be able to get financing, only that it's not going to be the slam dunk the grandparent seems to assume as there are other factors at work than just a deep order book.

          Did you even understand what I wrote? Or did you just reply to hear your own keyboard?

    • An existing order book does not show you everything about the company that you need to know about in order to risk an investment - look at Boeing, nearly 1000 orders for its flagship 787 model before it even flies, forecast of massive profits ahead, but now just breaking even on *production* costs after about 380 deliveries, massive deferred costs (meaning that the development costs are yet to be covered - infact, Boeing hasnt started paying them back yet), massive debts, an accounting block of well over 11

    • The government liked their 'jeep' design, but gave the design to Willys Overland and Bantam ended up making 2 wheeled jeep trailers. I guess the moral is "Don't promise something you can't deliver."
  • Tone (Score:5, Funny)

    by Anonymous Coward on Sunday April 03, 2016 @01:57PM (#51833501)

    The tone of the article is a little off, like the author wants Tesla to fail for whatever reason, and is grasping on the flimsiest available reason he can find.

    "Your product is in such high demand that there's no way you'll be able to produce enough! Take THAT, Elon!!!"

    • Re:Tone (Score:5, Funny)

      by Anonymous Coward on Sunday April 03, 2016 @02:28PM (#51833661)

      "Nobody goes there anymore. It's too crowded."

    • Take THAT, Elrond Musk!

      - GM Shillbag

    • Didn't read TFA. But your critique sounds like an argument for losing money with each sale, but making it up with volume.

      The question isn't the number of orders Tesla has gotten or how strong demand is. It's whether or not Tesla can fill that demand while making a profit. If they end up losing money with each sale, higher sales numbers actually make their finances worse. I mean if Apple offered to sell iPhones for 1 cent each, the demand would be close to 7 billion units. They'd sew up 100% of the m
      • Tesla are not some inexperienced startup any more. This is their 3rd EV. They know what's involved.

        They didn't have to announce the price just yet if they weren't confident of hitting it and still making a profit.

        The reason for the anti-Tesla articles is the same as the reason for every single other thing on commercial news websites. They need to say something that will cause people to click. Controversial being a popular technique.

      • sigh...

        As always the "lose money each sale" thing comes up.

        They are in no danger of losing money on each sale. The only question is HOW much of their profit margin can they safely put into investing in scaling up the factory to meet demand.

        If they want to take the safe way out, they could stop investing now, take until 2028 to deliver on their orders, and still make heaps of money. But of course that is stupid, and they are much better served by scaling up.

        TLDR - the only question is how much they will scal

      • Bear in mind that quite a bit of Tesla profits are going into the Gigafactory, which is going to make them the largest producer of batteries in the world. So the cost for batteries for them go WAY down, and they can sell batteries to other companies for a profit. This is a big part of their plan. Their cars get cheaper to manufacture if they don't have to buy their batteries from third parties at a premium because they are sucking up a HUGE part of the market. If I want 70% of the batteries in the world

        • Bear in mind that quite a bit of Tesla profits are going into the Gigafactory

          Profits? What profits?

          A lot of people (you're not alone) here on Slashdot could really use a class in how to read a balance sheet and a P&L statement.

          Tesla doesn't make a profit and the capital expense of building a factory isn't subtracted from short term profits, accounting doesn't work like that.

          Even if you back out 100% of the R&D spent in the last year, they STILL don't make a profit.

          Tesla is losing about $15K per Model S that it builds. The numbers never lie.

    • As Tesla expands from the 'enthusiast' into the general automotive market, most people aren't going to way 3-4 years for a car, they'll just buy their next choice. That's why it's an issue.

      • As Tesla expands from the 'enthusiast' into the general automotive market, most people aren't going to way 3-4 years for a car, they'll just buy their next choice. That's why it's an issue.

        It doesn't matter if some of the people who preordered back out. Eventually they will actually start shipping cars and then the number of preorders is completely irrelevant. The preorder was just a publicity stunt to get the money needed to actually produce the car, which is a fairly normal thing for any kind of growing business to do.

      • As Tesla expands from the 'enthusiast' into the general automotive market, most people aren't going to way 3-4 years for a car, they'll just buy their next choice.

        The thing about that is, if it's a quality electric vehicle you're looking for, there aren't any other choices, and before any other choice could ramp up, your Tesla would probably be on your doorstep.

        This probably is very little about "I need to buy a car" whereas it is very much about "I want an electric car."

        I want a quality electric vehicle. T

    • There are a lot of short sellers who are obligated to deliver TESLA shares in the future at a fixed price. Unless the stock tanks, they will be in trouble. In this case I don't see that the article writer disclosed any short interest, but I also didn't see any disclaimer of any interest of any sort.
      • by tomhath ( 637240 )
        Tesla hemorrhaged over a half billion dollars in the fourth quarter of 2015, and doesn't have anything to stop it for at least a couple of years.
        • by Anonymous Coward

          Tesla *invested* half a billion into a huge factory for an emerging product.

          Like to try again?

          • Re: (Score:2, Interesting)

            Tesla *invested* half a billion into a huge factory for an emerging product.

            Like to try again?

            Even backing that out, they lost money, hundreds of millions of dollars.

            Even backing out ALL R&D doesn't make them profitable.

            Tesla is losing about $15K per Model S sold. The fanboys like to talk about future investments and the gigafactory, but if you bother to read their income statement, you'll see that backing those out doesn't redress the problem.

            Tesla isn't profitable on what they build now. The Model 3 won't be profitable either, not for awhile. There is no assurance they will EVER been profit

    • by fermion ( 181285 )
      Tesla does not have the money to make cars for sale. That is why they are asking for $1000 down. They can now borrow money based on expected purchases. It is still risky because is would be easier for a customer in a situation to lose the $1000 rather than pay $30,000 or take that in debt. A simple thing like a change in tax law over the next year could kill the company. I imagine President Trump and Paul Ryan have no love for this giveaway of tax money to support Tesla.

      Tesla has not method to grow the

  • by Psicopatico ( 1005433 ) on Sunday April 03, 2016 @02:07PM (#51833561)

    Can I have mine with carburators, please?

    Love to tweak those things...

    • by tomhath ( 637240 )
      Probably not. Even if it had an older design gasoline engine you would get a carburetor, not a carburator. Yea, I saw the recent /. article about people who point out misspellings :^)
    • by chill ( 34294 )

      There might be an app for that. They have that lovely big screen instead of the dials. I can see adding something like Torque and maybe a carburetor-simulator app. Add in some sound effects for the old-time gear head to get audio feedback and you might have a seller there.

      • by Amouth ( 879122 )

        T I can see adding something like Torque

        I hadn't thought about that, i'd like to see Torque connected to a Tesla. wait for the "WTF?" screen to show up on the sensor options.

    • Sure... they might not be hooked up to anything, but I'm sure Tesla can bolt a carby onto the chassis somewhere

    • by GuB-42 ( 2483988 )

      Considering the massive storage space and poor range (compared to ICE) of the Tesla, I had always wanted to put a generator in there.
      Do this and make sure your generator have carburetors.

  • Check is in the mail.
  • by flyingfsck ( 986395 ) on Sunday April 03, 2016 @02:34PM (#51833687)
    Those kind of figures would instantly put them on par with a smaller manufacturer such as Chrysler. Great if they can pull it off.
  • Over 253,000 pre-orders so far... some of those people are going to have a to wait a few years for their car. I don't see why getting cash to fulfill an existing order would be a problem.
    • by Anonymous Coward

      Right on!!!

      EV is the next thing. And energy harvesting is the next next thing.

      Battery is the Keystone.

      Tesla will be THE manufacturer.

        Every car company will buy from Tesla. Every bus, train and motocycle companies will buy from Tesla.

      Every homeowner, industry and business owner will buy from Tesla.

      Even if Tesla doesn't sell a car, their success is a done deal.

  • Elon Musk is STILL a billionaire. Cash to fulfill the existing orders is the least of their problems. The Model 3 will likely see quality control and manufacturing problems like the Model X did, which may push back delivery dates a few years. But running out of money is pretty much a non-problem. Also, the longer they take to deliver these, the cheaper the components get (especially batteries), so they increase profitability by delaying. Not good news for the short-term share price, but long term I don't se
  • With all the press about the number of reservations I think that would be fair. Pay more money to receive your car earlier; esp in the first year.

  • Well, shit. There goes my dream of walking into a Tesla store and buying a $35,000 electric car next year.
    • On the other hand, you probably will be able to walk into a Chevy dealership next year and buy a Bolt. It won't be as fast or as good looking as the Model 3, but it will get you from point A to point B without gasoline and offer a 200 mile range.
  • People plunking $1000 on a car with 200,000 people in front of them are going to wait YEARS for their vehicle to materialise. Even if Tesla scales up from 50,000 to 500,000 cars it may still be 3 or 4 years before people take delivery of theirs.

    And Musk has gone on record saying he expects people to drop an average of $7000 on extras. So clearly that $35,000 is a headline price for a very basic vehicle and Tesla have an incentive to sell the rest as optional extras. I wouldn't even be sure that stuff like

  • I was under the impression Tesla's goal was to begin delivery of the Model 3 at the end of 2017. The key word there is "begin". Musk never said that all pre-orders will be delivered by such-and-such date. The reason people waited hours in line is so they could be earlier on the delivery list - nobody is expecting car number 300,000 to be delivered on the same day as car number 1.

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