Tesla burns through $2 billion in 2017

Photo: Tesla

Tesla reported record revenue for 2017, floated by customer deposits of the recently announced Semi truck and Roadster sports car. Despite its optimistic sales numbers, Model 3 production issues and cash flow problems haunt the company, but Tesla insists its on track to meet its production goals of 5,000 cars a week by mid-2018.

Tesla reported $3.3 billion in revenue, which was expected, but also posted a $771 million quarterly loss — its largest quarterly loss ever. The company reported a negative free cash flow of $276.7 million. And it reported a net loss of $2.24 billion in 2017, a significant increase over the $773 million net loss it reported in 2016.

We already know Tesla’s 2017 was a mixed bag, to say the least. There were highs: the launches of the Model 3, Semi, and Roadster. There were lows: painful quality reports from early Model 3 examples built last fall, damning safety and labor accusations in October, and a steady stream of cash going out the door to get the Model 3 and Gigafactory production lines up to speed.

The company reported that Model 3 deliveries were 1,550 in 2017, according to a report released on January 3rd, and in the fourth quarter of last year, 2,425 Model 3s were made, according to the automaker. Just after the car’s launch, another 260 were built in the third quarter.

Overall, Tesla delivered more than 102,000 vehicles in 2017 when Model S and Model X vehicles are included, above its target of finding homes for 100,000 vehicles in the year.

Tesla’s third quarter report from 2017 showed the company’s efforts to get the Model 3 into production are costing a fortune. The company lost more than $600 million in that three-month period alone, more than it lost in all of 2016. Therefore, the full-year loss numbers make for grim reading.

Comments

As long as it manages to stay afloat from a financial point of view, I wouldn’t be worried too much.
Beside delays, they always delivered and moved the entire car industry into a new direction.

Agreed. Short term investors might worry, but they shouldn’t be short term investors to begin with. This company is going places down the line.

As long as it manages to stay afloat from a financial point of view, I wouldn’t be worried too much.

Not sure what you mean – they lost $2 billion last year. That’s what the article’s about. They’re not really financially afloat. They’re staying alive with VC money. They’re not self sufficient, and they’re becoming less so.

Do you mean "as long as they don’t go out of business"? I mean, that’s kind of true of any company, isn’t it? Any company’s in business until it isn’t.

Other businesses are not as expensive the automobile industry. Tesla is incredibly young and mainly developes, designs and produces in a country more expensive than China. Combine that with the goal of environmental responsibility and their great goals. It’s tough but yes for Tesla it’s different than for other companies.

As long as they stay afloat even with big loss numbers they come closer to sustainability in this super expensive sector.

What happens in a couple of years when they lose their competitive advantage and still cannot produce a car that isn’t plagued with quality issues?

Tesla will sell them batteries.

Without a doubt.

I expect their tech and skill to mature.
But honestly I’d prefer an exciting car over a perfected anti-innovation.

Are they really going to lose their competitive advantage in "a couple years"? From what I see of the rest of the industry, I think they have at least 5-10 years. Everyone is finally talking a big game, but they’re only committing to "electrified", which is probably going to mean mostly hybrids in practice, and they’re also mostly taking about 5-10 years from now.

AND by then the new roadster will be coming out with significantly improved battery range. Is anyone else talking seriously about 500+ miles of range in a pure EV?

The market for electric cars is tiny.

I agree, it’s tiny now. I’m not sure what your point is.

In the U.S..

Most countries have high gas prices and import oil. And even then, Norway will stay above 50 percent electric and be able to decrease their incentives year after year.

Norway is a tiny market. Also when Denmark dropped their insentives the EV sales tanked.

The "market" for electric cars is the same as for petrol cars. The selection of available electrics means they can only target a subset of that market. As technology improves, there will be fewer and fewer advantages left to petrol cars. Plus the regulatory environment is clear that the sales of petrol cars have an expiration date.

Plus, Tesla has more than 400,000 pre-orders just for the model 3, plus new orders and people waiting to buy until they can test-drive one. That’s plenty of market for the next couple years. For reference, BMW US sells around 300k cars per year, all models.

This won’t happen. The real competitive advantage isn’t the drive-train or being first to market.

It’s the amount of vertical integration will keep their margins high, in the same way spacex does. They make 80%+ of their components in house.

The batteries are what the other car makers can’t replicate. Tesla has been building up their production capacity because they know Panasonic can’t supply the numbers that are coming.

If GM wants to make 100,000 Bolts, they’ll have to outbid every gadget maker in the world. Or buy from Tesla.

Lets say this happens and their sales stagnate, well then they won’t be spending a ton of building more factories might make a profit.

Tesla is incredibly young

Wait… wut? They are literally 15 years old! That is far from "incredibly young"! To lose $2 billion after being in business for 15 years is pretty terrible.

I’d argue they were niche for at least half that, less "car manufacturer" and more "interesting distraction."

Ok. None of that changes the date the company started, therefore how old (aka not "incredibly young") they are.

What’s the big deal? Apparently lots of people don’t really think it’s terrible given its stock is still over $300/share.

Plus, if you think this is terrible then where were you when Chrysler went bankrupt? Did your brain explode?

"Young" is a relative term. If Tesla were a fruit fly, it would be incredibly old. But if it were a red sea urchin (lifespan of 200 years), it would be practically a small child.

In the automotive world, I think Tesla is still in it’s adolescent phase; growing rapidly and figuring out what it really is. That makes it pretty young. Especially when you compare it to other car manufacturers, many of which are pushing 100.

Not sure what you mean – they lost $2 billion last year. That’s what the article’s about. They’re not really financially afloat.

Profit isn’t the only way to stay afloat. Money from investors is a perfectly valid way to stay financially afloat. Amazon did that for 20 years.

Yeah, but much of Amazon’s lack of profit was due to funneling funds into expansion and R&D. They could’ve posted profits for years if they didn’t so aggressively expand their footprint.

How is that different than Tesla? They could’ve stuck to luxury EVs in low quantities instead of building Gigafactory and Model 3.

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