Company Spotlight - Tesla

Tesla is one of the most hyped and talked about companies in 2017. They plan to launch many new products such as the Tesla Model 3, Tesla Roadster and the Tesla Semi truck. The Roadster is supposed to go from 0-60 in 1.9 seconds… that is unreal. If I had $200k to spend on a vehicle, that would be the one to get.

 

Potential Disaster? 

Tesla’s aggressive product creation and capital expenditure could be a disaster. Tesla is burning through almost half a million dollars every hour. According to Bloomberg’s calculation, Tesla would use all their available cash by August 6th. However, the company says that it will have enough money to meet their production targets.

People that are watching the company do expect the company to be burning cash at this rate. Tesla is relying on revenue through pre-orders, such as the pre-orders made on the Model 3. They will also be offering pre-orders to the public on the Roadster and Semi-trucks to companies.

In addition, the future may be bright due to an expected increase in cash flows from operating activities after Model 3 production in March and paying off capital expenditures relating to the Model 3.

Despite these optimistic remarks from Tesla, it does appear that they are cutting it close in terms of having enough operating liquidity. It is a possibility that Tesla may be doing too much too fast for the capital that they have available.

Perhaps Tesla is accelerating electric car product creation to put themselves ahead of the curve from other automobile manufacturers that are chasing them. Many traditional automotive companies are making significant changes to their business models to catch up with future consumer preferences.

This is a smart move by Elon Musk, but there are financial and operational risks involved for capital expenditures and manufacturing that are required. In addition, they are now at the hand of their lenders and the public markets. CNBC say is that Tesla is going to rely on the investors believing in Musk’s mission to remain happy.

 

Optimism  

I am optimistic that Elon Musk knows what he is doing, butthere are many risks that should not be ignored. All we can do is wait and see if Tesla can improve on its manufacturing process and learn from some of their challenges in manufacturing the Model 3. In my opinion, the key thing to look out for will be observing their manufacturing process.

If they improve on their manufacturing process and producing products efficiently, Tesla is going to blow the competition out of the water and solve many of their capital issues. This is the outcome many tesla investors are betting on and I happen to be one of them. 

I will be monitoring Tesla every week to track their progress and to observe how a company operates when trying to introduce cutting-edge technology to the public.

 

References:

https://themarketmogul.com/future-electric-vehicle-industry/

https://www.bloomberg.com/news/articles/2017-11-21/tesla-is-blowing-through-8-000-every-minute-amid-model-3-woes

https://www.cnbc.com/2017/11/21/teslas-breakneck-expansion-speed-could-be-a-car-crash.html