Last month, I
wrote about Tesla CEO Elon Musk’s contemptuous and breezy dismissal of
questions asked by financial analysts about the cashflow situation at Tesla.
Would the company need yet another infusion of money to remain afloat? Lame!
Next question.
That was Musk’s
response.
As it turns
out, it’s Tesla that’s lame. The company – Musk – just laid off several
thousand employees, about 9 percent of its workforce – which is one way to
raise cash (by not spending it on worker salaries) when you don’t want to admit
you need another infusion from investors – or realize you might not be able to
get one because those investors are becoming gun-shy about giving money to
Elon.
I’ve been pointing out for years that Tesla is a net
money-losing operation, despite all the crony capitalist advantages – including
electric car quotas in states like California, which force other car companies
to either build EVs they can’t sell (or sell at a loss) or buy “credits” from
an electric car manufacturer (Tesla) which the electric car company then uses
to offset its losses.
Even so, Tesla has lost something on the order of $5.4
billion dollars so far, according to most estimates. Yet – until quite recently
– most media coverage of Tesla has focused on what amounts to financial Fake
News of the most egregious kind, such as the hype-driven value of Tesla stock.
It’s true the stock price zoomed upward like a bottle rocket on the 4th of
July. But what was driving this?
Not anything of
value.
Analysts
refused to analyze the fact that Tesla loses money on every car it sells. That
it remains in business only because of investor infusions and deposits given on
cars that never seem to materialize.
Well, the
electric chickens may finally be coming home to roost.
At some point,
you either make money – or you don’t. If you don’t, you have to find people
willing to give you more of it. When you can’t do that anymore, you are forced
to scale back. You let people go in order to husband what resources you’ve
still got, in the hope that maybe you’ll be able to ride it out.
Elon is running
out of money. His operations aren’t sustainable.
That is the
real story behind the mass layoffs at Tesla and it’s still not being told. A
healthy and growing company doesn’t have to cut its workforce by almost 9
percent. There will likely be more cuts, too – unless Elon can raise another
$1.3 billion or so, which is the sum Tesla is expected to lose over the next
four quarters. Moody’s Financial Services said in March that Elon might need as
much as $2 billion to keep the doors open another year.
That would bring
the total losses to more than $7 billion dollars so far.
To put that figure
in some perspective, Ford – which mostly makes non-electric cars – earned a sum
last year almost exactly equivalent to what Tesla has lost since the company
first began making electric cars fifteen years ago. The Blue Oval reported a
net profit for 2017 of $7.6 billion dollars (PDF here).
But how many
people outside the car business know who the CEO of Ford is? Do you? He is not
the light of the media’s eyes, the subject of flattering profile pieces touting
his far-sighted genius. Elon is.
Why?
The guy has been
losing other people’s money for fifteen years!
And: Battery
powered cars are nothing new. They are hardly . . . Teslian. Tesla – the man –
was a brilliant theorist and inventor who among other things gave us AC current
and so made the transmission of electrical power over great distances both
practical and economical, two qualities which this writer has for years now
been pointing out Elon’s cars lack. Because Elon chose to focus on (and spend
other people’s money on) electric cars that are speedy, sexy and techy on the
theory that – like iPhones – these would wow the rich and then through
economies of scale draw in the less-well-heeled.
But the iPhone
is still expensive, an elite product for people with the disposable means and
the inclination to spend three or four times the cost of a perfectly
serviceable generic smartphone.
Very much like
the Tesla – the car – which likewise remains too expensive to be other than an
elite product for people with the disposable means and the inclination to spend
three or four times the cost of a perfectly serviceable IC-engined car. A $15k
Corolla may not be as speedy or as sexy or as techy as a $40,000 Model 3 – but
it gets them from A to B for about one-third the cost of Elon’s electric
luxury-sport sedan.
The tragedy is
that if Elon had never come along and carny-barked investors into investing in
a losing product, there might be a practical and economical electric car on the
market. But thanks to Elon, everyone making electric cars thinks they have to
make them like Elon does – speedy, sexy and techy rather than simple and cheap.
The real Tesla
would have grokked the difference immediately.
. . .
Got a question
about cars – or anything else? Click on the “ask Eric” link and send ’em in!
If you like
what you’ve found here, please consider supporting EPautos.
We depend on
you to keep the wheels turning!
Our donate
button is here.
If you prefer
not to use PayPal, our mailing address is:
EPautos
721 Hummingbird
Lane SE
Copper Hill, VA
24079