The Californian carmaker has an uncertain future.
I sometimes like to classify humans into two groups: those who know about cars and those who don’t. But it’s the latter who, whenever Tesla is mentioned, seems to believe its CEO, Elon Musk, is going to save the world. And colonize Mars. And sell you a flamethrower, all while making the Model 3 the most popular EV on the market. Although it’s important to give credit where it’s due, Tesla’s future is not a sure thing, despite being the first automaker to prove electric vehicles can look sexy and serve as suitable daily drivers.
Why am I saying this? Because numbers don’t lie. A few months ago, Bloomberg News did some digging and came up with some very interesting calculations. Since last November, Tesla has burnt through $8,000 a minute, or $480,000 an hour, of other people’s money. That’s right. Tesla has been solely reliant upon investors, both private and public, for its operating funds. It has never earned a single penny since it was founded in 2003. It loses money on every car it sells. Porsche, to compare, earns an average $17,000 for every new car that rolls off the production line.
It’ll be for that reason, and many others, that the upcoming production-spec Mission E all-electric sedan will be a long-term success while the Model S, as so proclaimed by former GM big wig Bob Lutz, will become a collector’s car once Tesla goes out of business. Wait did we just say 'out of business'? Yes. Based on those same Bloomberg calculations, Tesla will run out of money on August 6, 2018 at 2:17 a.m. New York time. Selling flamethrowers won’t help, despite the fact that, as of this writing, Musk has sold nearly $4 million worth. Taking $50,000 deposits for the new 2020 Tesla Roadster also won’t be enough.
You see, Musk has this habit of distracting people when things at Tesla are not going so well, such as not meeting Model 3 production deadlines. Speaking of which, there’s no room for failure regarding the Model 3. It must be a smashing success. But let’s say for argument’s sake Tesla completely sorts out those Model 3 issues and production ramps up to the promised 5,000 units per week. Will that fix everything? Probably not, and here’s why: long established automakers, specifically General Motors, have taken full advantage of Tesla’s production delays and other mistakes. GM CEO Mary Barra, also in November, told investors the automaker will launch a new line of electrics vehicles by 2021.
That’s in addition to the Chevrolet Bolt which, you have to admit, does not have the Model 3’s sex appeal. However, GM has been in the car business for a very long time and despite its 2008 bankruptcy, it knows what it takes to not only build cars, but also to meet deadlines. It has the resources (translation: deep pockets) to get things done. Under Barra’s leadership, the new GM continues to thrive. She understands, just as much as Musk, the changes the industry is going through and will continue to do so for the next couple of decades. While Musk needs to distract investors and financial industry analysts away from failed deadlines, Barra has already come up with a plan on how GM will make money from EVs.
Folks, the writing is on the wall, and I can’t say I’m happy to say that because I’ve been a longtime fan of Tesla. For years I was rooting for it and was a believer in Musk’s vision. I’m still a believer in that EV mobility future, but Musk is not the guy who’ll take us there. Let’s be honest, it’s not a task a single person can handle. An entire industry is required and this is precisely what’s happening right now. Tesla will not only be going up against GM, but also Ford, Toyota and Volkswagen. Simply put, these are the biggest automakers in the world. They have awakened to the reality EVs are a permanent thing. Tesla helped them realize that. So here we are in 2018. All automakers know how to make lithium-ion batteries.
They’re getting close to having solid state batteries. They’re hiring and listening to young and talented engineers who have big ideas. That old school “boy’s club” atmosphere is nearly gone, a longtime habit partially consisting of late night drinks at the office while the wives stayed at home putting the kids to bed. A woman is now calling the shots at GM and she’ll be credited, years from now, for re-routing the company for long-term success. Tesla? Look, it needs to sell cars. Lots more of them. It needs to sell them all at a profit. Tesla has now sold over 250,000 cars, but it took nearly a decade to get there. By contrast, GM sold 17,083 Chevy Bolts last year alone.
Factoring in GM’s upcoming new EVs, its century of experience and vast resources, and you can see Tesla has problems. Elon Musk has essentially taken the place of Apple’s Steve Jobs as the technology industry’s greatest showman but selling cars, even for $35,000, is not as easy as selling $600 iPhones. That’s my message to those who still put Elon Musk on a high pedestal covered in gold and dipped in ionic liquids. Still not convinced? Okay, if you had to choose between Tesla and GM to invest $8,000 of your hard earned money, where would it go? The company that’ll burn through it in one minute, or the one with the long-term money-making plan?