Tesla Model 3 Is Putting Automaker In Dangerous Territory
Tesla could run out of cash by 2018 unless it receives more funding. This is the reality facing the automaker as it continues to burn through the capital at a breakneck pace ramping up the output of its all-important Model 3.
Over the past 12 months, the electric automaker has been spending at a rate of about $480,000 an hour whilst only putting out just three cars. At this rate, the company is going to run dry by August of next year, unless another fresh infusion of cash comes in.
In contrast, General Motors manufactures dozen of different vehicles worldwide while spending the same amount per quarter. The biggest US automaker has been making money for years with its stock climbing to a post-IPO high point.
Get Our Latest News for FREE
From a return-on-investment standpoint, Tesla is a disaster while GM is a success. Tesla just posted the biggest quarterly loss in the company's 14-year history while GM is on track sell almost 10 million cars and trucks.
Much of Tesla's woes come from its massive investment in making the Model 3, a $35,000 car that isn't going to generate a return anytime soon thanks to production issues. According to Kevin Tynan, senior analyst with Bloomberg Intelligence, unless the company can raise at least $2 billion in fresh capital by mid-2018, the company is in very big trouble financially.
But it's not all doom and gloom because, despite catastrophic losses for the company, Tesla continues to enjoy a $50-billion-ish market cap. Raising capital also poses little problems as investors are more intent on looking at the company's story rather than its finances. And Elon Musk is a pretty good storyteller.
His recent unveiling of the new Tesla Roadster and Tesla Semi can be compared to Steve Jobs showcasing the iPhone. The flush of excitement prevented the company's stock from plummeting to where it probably should be fairly valued, at around $100-150 per share as customers shelled out their hard-earned cash to be a part of Musk's vision.
That being said, 2018 will a critical year for Tesla, one that could make or break the company. For now, investor confidence is still holding but everyone knows this won't last forever.
Production for the Tesla Model 3 needs to be whipped into shape if the company wishes to dig itself out of their current financial hole. By next year, it could either be known as the car that killed Tesla or the one that almost did.
