I don't understand why Tesla's losses keep increasing; now they're losing $33M a month, up from $20M a month a year ago and roughtly the same as last quarter. That with $50M in revenue this quarter and actual shipping product. Can someone explain? Are they still purchasing capital equipment? Are their overheads that high?
That said, $30M a month is not that many cars. If they can sell them, and losses don't increase as a function of sales, which seems to be the case now, they will eventually be in good shape.
EDIT: TL;DR: This quarter they lost the same amount as last quarter but sold 25 million more in cars. That means for every additional dollar in car they sold over last quarter, they lost that dollar. Not exactly scalable but hopefully temporary.
"The third quarter was a fundamental turning point for Tesla as we successfully transitioned to a mass production car company, growing from manufacturing 5 cars per week at the beginning of the quarter to 100 cars per week by the end. That rate has doubled since last month and is now at over 200 cars per week or 10,000 cars per year, which is at the critical threshold needed for Tesla to generate positive operating cash flow. One month from now, we expect Tesla to double production again and achieve the target rate of 400 cars per week or 20,000 per year. Despite many short term costs associated with the ramp, Tesla nonetheless expects to get approximately halfway to the 25% gross margin target by end of year."
edit: until they are not producing at least 200 cars / week, the operating cost of their manufacturing line is actually larger than the money they make from those cars produced. So, based on that logic Tesla should be losing money but less than in the past. However, in this quarter they went from manufacturing 5 cars/week to 100, which is something you can probably only do by revamping your operations (e.g. acquire new machinery, hire new people, etc.) Therefore, you have to incur a cost now in order to get the benefits in the future.
Right now they are building the Signature series cars. These are the first 1000 cars. The reservations for these cars involved a $40k payment up front, in some cases up to 3 years ago. General production cars only required a $5k payment up front. As a result, they are only capturing ~$50k per car, versus ~$85k once GP cars start rolling off the line.
In addition, they've been ramping up production (they're roughly halfway to their target 400/wk goal), and that involves overhead like training new staff and building out an operations team. They should get to full production capacity at the end of the month, but they've already hired those extra workers and they're going to burn through cash while they get up to speed.
> As a result, they are only capturing ~$50k per car, versus ~$85k once GP cars start rolling off the line.
That is not how GAAP accounting works. You record revenue when you finish building the car and it leaves the factory gate, not when you accept a deposit.
If you're scaling up production this is common. You invest a lot in the ability to produce something you can sell. It makes sense to have a loss while you ramp up. It's an investment.
That said, $30M a month is not that many cars. If they can sell them, and losses don't increase as a function of sales, which seems to be the case now, they will eventually be in good shape.
EDIT: TL;DR: This quarter they lost the same amount as last quarter but sold 25 million more in cars. That means for every additional dollar in car they sold over last quarter, they lost that dollar. Not exactly scalable but hopefully temporary.