Subscribe

Tesla may or may not make money selling electric cars

Tesla's finances are hidden behind a fog of mystery. We do know that CEO Elon Musk admits that Tesla probably won't be profitable until 2020. However, the question of finances might be missing the point, as many support or oppose Tesla based on other factors.

  • close
    A man looks around Tesla Motors' Model S P85 in the Tesla showroom in Beijing in this January 29, 2014, file photo.
    Kim Kyung-hoon/Reuters/File
    View Caption
  • About video ads
    View Caption
of

One of the most contentious points in coverage of electric-car maker Tesla Motors is its financial performance.

On the one side, analysts and naysayers note that the company continues to lose money.

CEO Elon Musk himself has admitted that the company won't turn a profit using Generally Accepted Accounting Principles (GAAP) until 2020 or later.

Recommended: The five worst states for drivers

That requires Tesla [NSDQ:TSLA] to raise more capital periodically, as it said two weeks ago it would do again: It plans to offer up to $640 million in new stock to bolster its cash reserves.

As of the end of June, its reserves and receivables together had dipped to $1.1 billion--perilously close to the $1 billion level it considers to be the necessary minimum to run its business.

On the other side, however, Tesla fans, advocates, and shareholders have suggested that the company makes as much as $20,000 profit on each car it sells.

That's hard to verify, as some of the more indirect costs for each vehicle can be allocated in any number of ways. No carmaker routinely discusses its costs or profits on a vehicle.

The successive years of losses, fans say, are a result of continually investing in new product development--the Model X that is to launch next month, and then the high-volume Model 3 car.

Those investments include its massive Gigafactory for lithium-ion cell and battery pack production, with the first one now under construction outside Reno, Nevada.

Depending on production volume for its cars and also its new home energy-storage business, it says, Tesla might need to build additional gigafactories within a very few years.

Investments also include its continuing expansion of the Supercharger DC fast-charging network offered free to all Tesla owners.

Proponents of those two points of view have been battling fiercely for years now on investment sites, technology blogs, and other venues--including Green Car Reports.

But as an Autoblog article reminds us, both sides of the debate have considerable validity.

Tesla did lose many in the second quarter of this year, but it remains unclear whether each Model S turned a profit or not.

As the article concludes:

Whether or not each individual [car] makes money – if you simply take the cost of materials, employee hours, warranty, and so on, and see if that's more or less than the driver paid for it – is something we don't yet know.

If we ever get to peek at Tesla's account books, we'll share that with you.

But Tesla itself has pushed back at times on the notion that it loses $4,000 for every Model S it sells, as suggested by a Reuters article that simply took its $47 million quarterly loss and divided that by the 11,532 cars it delivered.

As noted by Forbes, a Tesla representative wrote that ”new model development financing for traditional [car makers] is very different" than for established auto companies.

A part of the loss was due to the fact that “Model X investment peaked in Q2 and Q3 due to prototyping, lots of engineering design and testing by suppliers and our validation, crash testing and reliability testing," according to that note.

Perhaps the best summary of the situation we've seen was the headline on a story in Britain's Financial Times, which read simply, "To be rational about Tesla is to miss the point."

Those who are positive on the company's prospects feel that way not because it's profitable today but because it's created a desirable new car brand, with a remarkable product that changed the paradigm for what an electric car could be--complete with dedicated fast-charging where it's needed.

More than three years after the first Tesla Model S was delivered, no other maker has a competitor that even comes close.

The negative sentiment, on the other hand, suggests that this is all well and good, except that Tesla has now hemorrhaged cash for a decade--and shows no imminent signs of turning that around.

It's a wonderful topic for us to cover.

The Christian Science Monitor has assembled a diverse group of the best auto bloggers out there. Our guest bloggers are not employed or directed by the Monitor and the views expressed are the bloggers' own, as is responsibility for the content of their blogs. To contact us about a blogger, click here. To add or view a comment on a guest blog, please go to the blogger's own site by clicking on the link in the blog description box above.

About these ads
Sponsored Content by LockerDome
 
 
Make a Difference
Inspired? Here are some ways to make a difference on this issue.
FREE Newsletters
Get the Monitor stories you care about delivered to your inbox.
 

We want to hear, did we miss an angle we should have covered? Should we come back to this topic? Or just give us a rating for this story. We want to hear from you.

Loading...

Loading...

Loading...

Save for later

Save
Cancel

Saved ( of items)

This item has been saved to read later from any device.
Access saved items through your user name at the top of the page.

View Saved Items

OK

Failed to save

You reached the limit of 20 saved items.
Please visit following link to manage you saved items.

View Saved Items

OK

Failed to save

You have already saved this item.

View Saved Items

OK