ACCORDING to Bloomberg, Tesla – which, whoa, has been in business for 15 years – is burning $6,500 each and every minute. Someone do the math, quick.
Free cash flow (how much money a company makes after removing capital expenditures) has been negative for Tesla for the past three quarters. For a full 12-month period between the end of 2016 and 2017, Tesla was recording negative free cash flow of around $500 million per quarter.
It doesn’t take an accountant to know these figures and stats aren’t promising. But Elon Musk – all-round global achiever and godfather of Paypal, Space-X et al – obviously has a business head on his shoulders.
So how have things got so far out of whack?
Experts peg the end of this year as doomsday for Tesla, unless there is a dramatic turnaround. The company doubled its workforce last year, while scaling up for Model 3 production, and employee numbers more than tripled from 2014 to 2017. Once again, get out the abacus, because revenue per employee has stagnated.
Tesla went for automation as a solution, but the man himself has criticised the resulting robotic production model, a move which has since inspired him to tweet that “humans are under-rated”. Over-automation is a process that has tripped-up better-established vehicle manufacturers than Tesla, including Volkswagen and Fiat.
Musk has touted his “Russian doll” theory of contractor and subcontractor companies involved in production at Tesla, and made confident statements about the future (no need for additional financing this year, and so on) – but experts say otherwise.
First quarter results for the Tesla Model 3 are due out any day now. The company churns out 2,000 vehicles a week from its Fremont, California, plant, but unless punters are buying them as fast as they come off the line, impressive production figures are no gauge of success. (And it must also be noted that 2,000 cars a week is way short of Tesla’s stated goal of 5,000.)
Could a giant such as Musk eventually be felled by a few minor miscalculations and a couple of bad decisions? Quite possibly; he wouldn’t be the first, and he has fingers in many pies. Multiple rocket launches soak up a few dollars, for a start.
As Musk’s Rocket Man heads out to the Martian orbit in his shiny red Tesla starship, listening endlessly to Life On Mars in one ear and Space Oddity in the other – a cruel and unusual punishment, even for a dummy – Musk may be feeling the pangs of his own frustration.
Or maybe, as so often thus far, he knows something we don’t.