Tesla Burns Through Other People's Money At A Rate Of $8,000 A Minute

Industry News / 42 Comments

Estimated date when its cash runs out: August 6, 2018. 2:17 a.m.

Tesla CEO Elon Musk is unquestionably a visionary genius and a brilliant show man who wants to save the planet. He's just not a very good businessman. A few days ago, former GM Vice President Bob Lutz, who over his long career also had gigs at BMW and Chrysler (thank him for the original Viper), predicted Tesla would go out of business before 2019 due to its out of control costs and inefficient manufacturing operation, among other things. "Saving the planet he may be, but meanwhile he's running a lousy business," Lutz pointedly said.


Bloomberg, meanwhile, has been collecting data over the past year regarding Tesla's burn rate and the results verify Lutz's statements. At its current pace, Tesla is burning through $8,000 a minute, or $480,000 an hour. Remember, Tesla has never been profitable, so all of that lost money comes from investors. Bloomberg's trajectory data further calculated that, given the current burn rate, Tesla will exhaust its cash supply on Monday, August 6, 2018 at 2:17 a.m. New York time. Even though Tesla has a market value of $53 billion, $5 billion more than Ford, the latest sign of its cash problems was the recent reveal of the new Roadster. Think about it:


For what other reason would Musk ask buyers for a $250,000 down payment for the Founder Series Roadster, and $50,000 for the standard Roadster? He needs the cash, and he'll probably get it despite the fact the Roadster is more than two years away from beginning production. For its new Semi truck, companies can place $5,000 pre-orders. But will those deposits be enough to sustain Tesla past August? No. In fact, that's all ass pocket money compared to the real amount Tesla needs to keep the lights on. A senior Bloomberg analyst estimates Tesla will need to raise at least $2 billion in fresh capital by mid-2018.

Also troubling for Tesla is that investors, who bought $1.8 billion of its debt a few months ago, still haven't recovered their money. Given everything, what are Tesla's options going forward? The most likely scenario is an equity sale, but shareholders probably won't like that because it would damage them. Elon Musk, however, is the biggest shareholder with a 20 percent stake. Will he be willing to give some of that up to potentially save the company from financial ruin? No doubt 2018 is going to be a very interesting year for the Californian carmaker.


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